Friendship Bay Hotel v Branganzaab and Roy Bailey

• Jurisdiction: St Vincent and the Grenadines
• Judge: JOSEPH, Monica J. (Ag.)
• Judgment Date: 24 March 2011
• Judgment citation (vLex): [2011] ECSC J0324-1
• Docket Number: HIGH COURT CLAIM NO. 396 OF 2010
• Court: High Court (Saint Vincent)
• Date: 24 March 2011

[2011] ECSC J0324-1

THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

HIGH COURT CLAIM NO. 396 OF 2010

Between:

Friendship Bay Hotel

Claimant

and

Branganzaab

First Defendant

Roy Bailey

Second Defendant

DECISION

JOSEPH, Monica J. (Ag.)

1 There are two applications for security for costs, supported by affidavits. An application by the First Defendant filed on 14^th January 2011. An application by the Second Defendant filed on 9^th December 2010.

CONSOLIDATION OF APPLICATIONS

2 Mr. John's submission was that the applications were consolidated. Mr. Delves submitted that the applications were not consolidated, that they are separate and distinct, each notice of application being supported by its particular affidavit.

3 The request on behalf of the First Defendant to the Court Office was for the applications for security for costs to be heard by the court on 15^th and 16th February 2011, contemporaneously with the Claimant's application for interlocutory restraining orders against the Defendants. The Court Office responded to that request and listed both applications to be heard together. The two applications were not consolidated. The effect is almost the same. This is not two different suits but applications in the same suit.

BACKGROUND

4 The Claimant is a company registered under the Companies Act (Ch. 219) and Act No. 8 of 1994 (the Companies Act). The First Defendant is a company incorporated in Stockholm, Sweden and registered under the Companies Act. The Second Defendant is the Receiver appointed by the First Defendant under the provisions of a November 2005 mortgage arrangement between the Claimant and the First Defendant.

5 The First Defendant made a loan to the Claimant secured by that mortgage of its Bequia property (property). The Claimant has not made any repayments and repayment of that loan with interest, was due on 15^th May 2008. The Claimant went into receivership on 22^nd April 2010 and the Second Defendant was appointed receiver under the mortgage.

6 The Claimant filed a statement of claim on 28^th October 2010 claiming against the Defendants:

• 1. A declaration that the option to purchase was at all material times a clog on the equity of redemption and void and unenforceable.

• 2. A declaration that the sum owed by the claimant to the First Named Defendant is US$2,600,000 being principal plus interest at the rate of 5 per centum per annum.

• 3. A declaration that the deed of further charge is oppressive, unconscionable, void and unenforceable.

• 4. An order that the sum contained in the Deed of Further Charge is a penalty and/or a premium and is unenforceable.

• 5. A declaration that the said Deed of Further Charge fails to comply with section 250 of the Companies (Act) 1994 and is void and unenforceable as a charge security or mortgage on the said hereditaments.

• 6. A declaration that the Second Defendant breached his fiduciary duty to the clamant.

• 7. A declaration that the Second Defendant failed to exercise his powers as Receiver in good faith.

• 8. A declaration that the Second Defendant failed to deal fairly and equitably with the Claimant.

• 9. A declaration that the Second Defendant failed to do everything to obtain the best price reasonably obtainable or to properly expose the property to the market.

• 10. A declaration that the Second Defendant breached his statutory duty to the claimant.

• 11. An order revoking the appointment of the Second Defendant.

• 12. An order that the Second Named Defendant forthwith account for all fees and expenses incurred during his tenure and administration up to the date of the cancellation of his appointment.

• 13. An order that the Claimant be deemed not liable for any act or fee or expense incurred by the Second Defendant whilst in breach of his duty to the Claimant.

• 14. An interim order restraining the Defendants, their servants, agent or howsoever otherwise stated from selling the said hereditaments until the loan sum due and payable by the Claimant is determined by the court.

• 15. An interim order that the reserve price be not less than EC$25.205,998.50 for the said hereditaments plus EC$1,750,000,00 for the hotel as a going concern.

• 16. An order that any advertisement placed by the Defendants contain accurate information and that prospective purchasers be given sufficient time to inspect the premises and conduct all necessary inquiries.

JURISDICTION

7 Mr. John submitted that the court has jurisdiction to hear the applications by virtue of section 548 of the Companies Act, whether or not the First Defendant falls squarely under any of the categories in CPR Pt 24.3. Counsel urged upon the court that the issue of the insolvency of the company grounds the court's jurisdiction. He citedSurfside Trading Ltd. v Landsome Group Inc. et al AXAHCV/2005/0016 where the court considered a comparable provision to section 548 of the Companies Act.

8 Ms. Sylvester, in adopting the submissions made on behalf of the First Defendant, submitted that the ground of the Second Defendant's application is that the Claimant is a limited liability company and is insolvent. If successful in the litigation, the Claimant would be unable to pay costs of the Second Defendant who was appointed Receiver, acting as agent on behalf of the Claimant.

9 Security for costs ought not to negatively impact the Claimant who is seeking an interim order mentioning a reserve price of not less than 25 million E.C. dollars and 1.7 million for the hotel as a going concem. With that claim value, the Claimant ought to appreciate the cost implication, stated counsel.

10 Counsel submitted that, procedurally the Court has been moved under Part 24 of CPR 2000, but the Second Defendant's application is on the basis of insolvency, which is grounded in Section 548 of the Companies Act.

11 Mr. Delves' submission was that the application for security for costs was made under Pt. 24.3, that the Claimant does not fall under any of the categories mentioned in that part and that the court has no jurisdiction to entertain the applications under that part. Counsel mentioned that Section 548 of the Companies Act provides for applications where a company is insolvent.

12 Pt 24.3: "The court may make an order for security for costs …only if it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order, and that —

• (a) some person other than the claimant has contributed or agreed to contribute to the claimant's costs in return for a share of any money or property which the claimant may recover;

• (b) the claimant —

  • (i) failed to give his or her address in the claim form;

  • (ii) gave an incorrect address in the claim form; or

  • (iii) has changed his or her address since the claim was commenced, with a view to evading the consequences of the litigation;

• (c) the claimant has taken steps with a view to placing the claimant's assets beyond the jurisdiction of the court;

• (d) the claimant is acting as a nominal claimant, other than as a representative claimant under Part 21, and there is reason to believe that the claimant will be unable to pay the defendant's costs if ordered to do so;

• (e) the claimant is an assignee of the right to claim and the assignment has been made with a view to avoiding the possibility of a costs order against the assignor;

• (f) the claimant is an external company; or

• (g) the claimant is ordinarily resident out of the jurisdiction,"

13 I agree that the Claimant does not fall within the categories of 24.3. Part 24.1 reads:-

"This Part deals with the power of the court to require a claimant to give security for the costs of the defendant".

(Against a bullet mark) it continues:

"Additional provision is made in relevant enactments relating to limited companies for security to be ordered against an insolvent claimant company."

14 I think that part does two things: It states that that Part of the Rules sets out the powers for the granting of security for costs generally and provides, in a case of limited company that is insolvent, that the relevant legislation (section 548) applies. That section enacts:

"Where a company is plaintiff in any action or other legal proceeding, any judge having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs and may stay all proceedings until the security is given."

The Court has jurisdiction to entertain the matter under Section 548 of the Companies Act.

15 George-Creque, J. (as she then was) inSurfside Trading Ltd. v Landsome Group Inc. et al AXAHCV/2005/0016 dealt with that point in this way:

"Most of the authorities cited in the course of argument concern the applications brought under mirror provision to section 276 in other jurisdiction. It is clear however, given the claimant's admitted impecuniosity that it would have been open to the applicants to apply solely on this ground. I am further of the view given the clear wording of section 276 that notwithstanding an application being made under CPR 2000 Part 24, that where a claimant company admittedly is impecunious I am not precluded from a consideration of requiring security of such claimant company under this section even though such company may not fall within any of the categories set out under CPR 2000 Part 24.3 (a) to (g)."

The difference between this case andSurfside case is that the company in that case fell within one of the categories of Part 24,3, in addition to coming under a similar provision to Section 548, whereas this case does not fall within categories (a) to (g),

GROUNDS

16 Five grounds are put forward by the first defendant to support its application for security for costs:

• (1) The Claimant is insolvent and...