Bracco et Al v Owens Banks Ltd

• Jurisdiction: St Vincent and the Grenadines
• Judge: Bishop, J.A,Moe, J.A.
• Judgment Date: 11 December 1989
• Neutral Citation: VC 1989 CA 3
• Docket Number: Civil Appeal No. 2 of 1988
• Court: Court of Appeal (Saint Vincent)
• Date: 11 December 1989

Court of Appeal

Robotham, C.J., Bishop and Moe, JJ.

Civil Appeal No. 2 of 1988

Bracco et al

and

Owens Banks Ltd.

Appearances:

N. Fennelly and R. Nesbitt, instructed by Hughes & Cummings, for the appellants

H. Forde, Q.C. and A. Shepherd, instructed by E. Layne, for the respondent.

Contract - Debt — Whether loan was made — Evidence supported loan having been made — Appeal dismissed — Rules of the Supreme Court (Revision) 1970, Order 20, R. 5(1), 8(1).

Bishop, J.A

1 This appeal is against the decision of Singh J. in which he ordered that judgment be entered for the plaintiff, Owens Bank Limited, against the defendants Fulvio Bracco and Bracco Industria Chimica Spa, jointly and severally, for (a) the principal sum of nine million Swiss francs, (b) interest accrued to 2nd February 1981, of one million, one hundred and twelve thousand, four hundred Swiss francs,(c) additional interest accrued from February 3rd 1981 to the date of issue of the writ, 20th November 1981, of four hundred and thirty thousand, eight hundred and twenty Swiss francs and (d) expenses connected with dishonoured drafts, of one hundred and fifty-two Swiss francs, making a total of ten million, five hundred and forty-three thousand, three hundred and seventy-two Swiss francs. It was further ordered that there be interest at the rate of 6% per annum on the principal sum of nine million Swiss francs from the date of issue of the writ, until payment.

2 The plaintiff was also awarded costs to be taxed, certified fit for two counsel. In addition thereto the learned judge ordered that the registrar “forthwith quantify upon proof produced by the plaintiff, all costs and expenses incurred by the plaintiff consequent upon the consent order which authorised the court travel to London to take the evidence of the number one defendant and to issue a certificate thereon”. The defendants were ordered “to refund such costs and expenses to the plaintiff within 7 days of the date of the issue of the registrar's certificate”. This certificate, when issued, was to be a part of the order of the court. It is not necessary to set out, verbatim, the grounds of appeal relied upon by either of the appellants.

3 Owens Bank Limited, the respondent (also called the Bank), is a limited liability company with registered office at Bay Street, Kingstown, in the island of St. Vincent. It operates an off-shore bank, and there are what were described as corresponding banks in other countries, including Denmark and Venezuela. Between 1978 and 1983 Armando Nano was Managing Director of the Bank in St. Vincent. There was uncontradicted evidence that from about 1977, the Bank, through Armando Nano, deposited cash to an amount of ten million Swiss francs, in Geneva, at the home of Hector Michel, a financial consultant of some 14 years' experience, and who had worked in Africa and Europe.

4 It was deposited as a matter of policy because, for foreign citizens and companies, as Hector Michel explained: “there was a very special situation in Switzerland. The importation of capital into Switzerland, starting 1975, was charged a negative interest of 10% per each 3 month period or 40% per year. There was no other nation who restricted movement of capital into a country, and the reason for this negative interest was to prevent a massive arrival of currency into the country as there were rumours that Swiss francs would be devalued”. Whereas banks in Switzerland charged 40% per year, Hector Michel charged 0.1%.

5 Fulvio Bracco, who lived in Milan, Italy, was the president of Bracco Industria Chimica Spa, a company that manufactured and sold pharmaceuticals. He was also the President of Centro Diagnostico Italiano, a company that operated a clinic for the diagnosis arid treatment (in some cases) of illnesses. There were other companies in which Fulvio Bracco held high office and had significant financial interests. In many of the companies, from about the year 1972, he had as financial manager, Franco Malesci, of whom Bracco said “He was my alter ego from the financial point of view. He had my total confidence.”

6 Bracco Industria Chimica Spa was a company registered in Italy and its certificate of registration was exhibited during the case in the Court below. Its Chairman, Managing Director and attorney was Fulvio Bracco, the first-named appellant and he was entrusted with power to make binding decisions for and on behalf of the company. From about 1977, Diana Dasilva Bracco, elder daughter of Fulvio Bracco, was a member of the Board of Directors of this company. According to the evidence adduced, there was in a record of a meeting of the Board of Directors, information to the effect that Fulvio Bracco had power up until 1950, “to borrow money for the company” additionally, he was authorised to make “any commercial contract for the company including honouring Bills of Exchange”.

7 According to the witness Franco Moreno, a lawyer if any limitation had been imposed on Fulvio Bracco's powers in that company, it would have been set out in the Certificate of Registration which he had examined and produced as an exhibit at the trial. In particular, Franco Moreno testified: “He could sign documents acknowledging money owed by this company”. As against the testimony of the lawyer, there was that of Diana Bracco who said that “the Executive body among the Board of Directors would have to consider and approve any loan involving the company”. She said that her father, as President, could represent the company “within limits of internal regulations.

8 He could sign contracts of loan with previous approval of the company's committee” and the power he had entitled him to sign promissory notes for number two defendant”. Franco Malesci, who from 1972, was financial manager of a number of companies (including Bracco Industria Chimica Spa) in which Fulvio Bracco held office, said under cross examination: “I know that No. 1 defendant had authority to borrow money on behalf of No. 2 and sign Bills of Exchange for this purpose”. (He was a defence witness). Pietro Mascherpa was financial administrator of Bracco Industria Chimica Spa from about January 1979 and he said that in that year “the company did not borrow money from the plaintiff the accounts do not show any such loan”. The value of his evidence will be best understood if, at this point, I quote the following replies he gave under cross examination.” I don't know if Bracco had authority in 1979 to borrow for the company cannot say from my knowledge whether Bracco committed number 2 defendant to a loan. The balance sheet shows no loan by plaintiff to Bracco for number 2 defendant. I cannot say if Bracco took such a loan. I cannot say he did not take such a loan”.

9 Litigation began on 20th November, 1981 when Owens Bank Limited filed a Writ of Summons in the High Court of Justice against Fulvio Bracco and Bracco Industries Chimica Spa. Leave was granted to issue the writ and serve notice thereof on the defendants, out of the jurisdiction. Conditional appearance was entered. On 1st March, 1983 there was an application to set aside the order giving such leave to issue the writ and to serve notice, and also set aside all subsequent proceedings. The application was refused by Renwick J. who stated, inter alia: “the defendants are not saying that they entered into a contract, the terms of which are different from those alleged by the plaintiff. They are saying that they entered into no contract at all.”

10 Conditional appearance was deemed to be “final appearance” under an Order entered on the 2nd August, 1983. No defence was filed, and judgment in default of defence was entered on the 9th February, 1984, for $17,360,098.74 and $62.00 costs. On the 27th March, 1984, that judgment in default of defence was set aside and the defendants were ordered to file and serve the defence within 7 days. This was done and issue was joined. The Record of Appeal showed that a Summons for Directions was filed on the 27th April, 1984 and an order in respect thereof, was made on the 6th June, 1984. About 2 years later the Bank requested, a hearing, and with the parties agreeing, a date was fixed. However, before the hearing started, the bank sought leave to file an amended Statement of Claim. Leaves was given on the 30th January, 1987 and the defendants were also ordered to file an amended defence, if necessary within 2, months. An amended defence was filed on 4th July, 1937. For the purposes of this appeal it is necessary, in my view, recall the pleadings in some detail.

11 The amended Statement of Claim:

12 Paragraph 1 alleged that the claim was against the first and second defendants jointly and severally, for the sums of two million, three million and four million Swiss francs respectively, with interest thereon at 6% per annum respectively, being:–

“Loans made by the plaintiff to the first defendant and witnessed and acknowledged by and under 3 receipts in writing given by the first defendant and/or the second defendant to the plaintiff for each of the said sums, each said receipt bearing date 31st January 1979 and signed by the first defendant for himself and/or on behalf of the second defendant.”

13 The second paragraph asserted that the defendants expressly agreed with the plaintiff to repay the said sums with interest thereon, as agreed, on the 27 ^th 28th and 29th days of August 1979 respectively, at the bank's account at Banco del Centro Consolidado, C.A. Caracas, Venezuela.

14 Paragraph 3 averred:

“The defendants also expressly and irrevocably agreed that should they fail to repay the said sums with interest agreed before the 29th day of August 1979, and as aforesaid:

• (a) The defendants would have delivered to the plaintiff, at its request security up to a limit of the said agreed sum and interest, by the Corner Bank of Lugano or by any other principal bank of the plaintiff's...