The Judicial Committee of the Privy Council Decisions

Suisse Security Bank and Trust Ltd v. Governor of the Central Bank of the Bahamas (The Bahamas) [2006] UKPC 41 (27 July 2006)

Privy Council Appeal No 66 of 2004
Suisse Security Bank & Trust Limited Appellant v. Julian Francis (in the capacity of Governor of the Central Bank of the Bahamas) Respondent
FROM
THE COURT OF APPEAL OF THE BAHAMAS

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DECISION OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL ON COSTS

Delivered the 27th July 2006

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Present at the hearing:-

Lord Hope of Craighead

Lord Walker of Gestingthorpe

Lord Carswell

Lord Brown of Eaton-under-Heywood

Lord Mance

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[Delivered by Lord Mance]

1. In a judgment delivered 13^th March 2006 their Lordships held that there was no basis on which to set aside or remit the decision of the respondent as the Governor of the Central Bank to revoke the licence held by the appellant Suisse Security Bank & Trust Company (SSBT) to carry on banking and trust business within the Commonwealth of the Bahamas, and therefore humbly advised Her Majesty that the appeal be dismissed.
2. Their Lordships now have before them an application by the Governor that the costs of the appeal should be borne by Mr Mohamed Harajchi, SSBT's principal shareholder and chairman of its board, rather than by SSBT itself.
3. In support of this application, the Governor refers to the following passage in paragraph 5 of their Lordships' previous judgment:

"At an interlocutory hearing before Davis J on 15^th July 2002, junior counsel (Mr Gomez) then acting for SSBT told the judge that 'Mr Harajchi is the mover and shaker of the appellants and in real terms he is the appellant'. Mr Harajchi was and is the principal shareholder and chairman of the board of SSBT. The Court of Appeal thus described the appeal before it as 'a further appeal by the principal shareholder', and Mr Blair QC told the Board that the Governor was content to continue on that basis"

4. Their Lordships further recorded in paragraph 5 of their judgment that, following the revocation on 2^nd April 2001 of SSBT's licence, a provisional liquidator (Mr Winder) was on 9^th April 2001 appointed in respect of SSBT by order of Allen J. Their Lordships also noted that "no-one other than Mr Winder can on the face of it have authority to act on SSBT's behalf". On the present application, it is pointed out on behalf of Mr Harajchi that, despite the appointment of a provisional liquidator, SSBT's board retained residuary powers, such as the power to instruct lawyers to oppose any petition and, on the making of a winding up order, the power to appeal against that order: cf In re Union Accident Insurance Co. Ltd. [1972] 1 WLR 640, 642 per Plowman J.
5. On that footing, it is submitted that the board chaired by Mr Harajchi retained power to challenge the revocation of SSBT's licence, which was the foundation of the Govermor's power - under s.14(5) of the Banks and Trust Companies Regulation Act (Chapter 287) set out in paragraph 3 of their Lordships' previous judgment - to apply to the Court for the winding up order which Allen J made. Their Lordships are for present purposes prepared to accept this submission as correct without further examination. Indeed, during further interlocutory proceedings involving an issue which of two firms of solicitors had authority to represent SSBT in the present litigation, Davis J on 14^th January 2002 referred to, and, as their Lordships read his remarks, probably applied the principle in In re Union Accident Insurance Co. Ltd.
6. However, none of this bears on the central basis of the Governor's application, which rests on principles set out by their Lordships in their opinions delivered by Lord Brown of Eaton-under-Heywood in Dymock Systems (NSW) Pty. Ltd. v. Todd [2004] UKPC 39, [2004] 1 WLR 2807. In Dymock Systems their Lordships in paragraph 25 noted that costs orders against non-parties are "exceptional", but added that this meant that the case must fall outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. They also said that:

"Perhaps the most difficult cases are those in which non-parties fund receivers or liquidators (or, indeed, financially insecure companies generally) in litigation designed to advance the funder's own financial interests."

7. In paragraph 29 their Lordships concluded:

"In the light of these authorities their Lordships would hold that, generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence fails. As explained in the cases, however, that is not to say that orders will invariably be made in such cases, particularly, say, where the non-party is himself a director or liquidator who can realistically be regarded as acting rather in the interests of the company (and more especially its shareholders and creditors) than in his own interests."

8. Contrary to Mr Harajchi's submission, their Lordships cannot regard this as a case where Mr Harajchi was acting in the interests of SSBT or more especially its general body of creditors, as opposed to his own interests. The inference - from the way he was running SSBT before its licence was revoked and from his "silence and non-cooperation" after such revocation (cf their Lordships' previous judgment, paragraph 47) - is that he was treating SSBT as his creature and preferring his own interests to its. SSBT's major assets did not consist of "cash on hand and in banks" (as stated in its audited accounts and most recent quarterly reports) but of deposits with two companies given similar names to SSBT but owned and controlled by Mr Harajchi. The assets held with one of these companies were removed from the Bahamas after the revocation of SSBT's licence and the appointment of its provisional liquidator; and it has been impossible to confirm the existence or the location of the funds held with the other company. The appeal was, nonetheless, pursued at Mr Harajchi's instance, although it was in these circumstances "inconceivable that SSBT could be allowed to continue as an operating bank" (paragraph 47).
9. The excuse is made on Mr Harajchi's behalf for not giving any explanation or assistance regarding any of these matters that "rightly or wrongly" he believed that "any substantive responses were a matter for the Governor (on any reconsideration) rather than for the courts of appeal". Their Lordships are also told that he "strongly denies that the 'missing funds' allegation has any substance whatsoever" and, since their Lordships' decision "has already met with and commenced co-operation with the Provisional Liquidator in relation to the outstanding matters". Their Lordships concluded in paragraph 47 of their previous judgment that it was "wholly unconvincing" for Mr Harajchi to submit that, if an additional notice had been given under s.14(2) of the Act relying on problems relating to the location of SSBT's cash and investment assets, then "much could have been said in response" and that Mr Harajchi's silence and non-cooperation spoke volumes already at the date of the hearing before their Lordships. The further general excuses now presented on Mr Harajchi's behalf are in their Lordships' view as unconvincing in this regard as the previous submissions. Mr Harajchi has still not attempted to dispel the obvious prima facie inferences from what occurred and transpired.
10. Finally, it is submitted on Mr Harajchi's behalf that no notice was given of the present application to seek costs against him as a non-party. Such a notice was given before the hearing in the Court of Appeal, but the Court made no order for costs against him (although their Lordships are not informed that specific reasons were given for the refusal). Thereafter, leave was sought from the Court of Appeal for an appeal to the Privy Council and was given conditionally upon "the appellant" providing security not exceeding $2,861.00 for any costs that their Lordships might order the appellant to pay. Their Lordships doubt whether any further notice was called for, beyond that given prior to the Court of Appeal hearing. In any event, a failure to give notice of intention to seek costs against a non-party is no more than a factor to be borne in mind when considering whether to exercise the jurisdiction to make an order for costs against a non-party: see Dymock's Franchise Systems (NSW) Pty. Ltd. v. Todd at paragraph 31. The condition attached by the Court of Appeal of the Bahamas to the leave granted to appeal to their Lordships (viz that security for costs be provided in the sum of $2,861) was satisfied by monies paid into court by Mr Harajchi in SSBT's name. Their Lordships are informed that the sum of $2,861 is the conventionally taken equivalent of £1000 sterling, which, under Rule 4(a) of the Bahama Islands (Procedure in Appeals to Privy Council Order 1964, represents the maximum amount that the Bahamian Court of Appeal is permitted to order by way of security for costs of an appeal to their Lordships. The actual costs of the present appeal must in the event have totalled many times that sum.
11. Their Lordships will in all the circumstances humbly advise Her Majesty (a) that an order for costs in respect of the appeal to their Lordships should be made against Mr Harajchi personally, and (b) that the $2,861 paid by Mr Harajchi into court in the name of SSBT together with any interest earned thereon should forthwith be paid out to the Respondent in partial satisfaction of the order for costs, which should in all other respects be enforceable against Mr Harajchi personally in the ordinary course.