UKPC 3
Privy Council Appeal No 0026 of 2010
E. Anthony Ross (Appellant) v Bank of Commerce (Saint Kitts Nevis) Trust and Savings Association Limited (Respondent)
From the Court of Appeal of St. Christopher and Nevis
JUDGMENT DELIVERED BY
15 February 2012
Heard on 17 January 2012
Charles McBryan Finlay QC
Frank E Walwyn
(Instructed by Clyde & Co. LLP)
Karl Hudson-Phillips QC
(Instructed by Collyer Bristow LLP)
LORD WALKER :
The course of the litigation
"The testimony of Molans, the Claimant, Sir Dennis Byron and John Kelsick setting out the circumstances surrounding and the actual execution of the [1982 deed] (with Sir Dennis Byron as assignor, the Claimant as assignee and Kelsick as an attesting witness), assigning to the Claimant all of the rights and interests of the Beneficiary Companies in the Deposits. This was done with the knowledge and approval and in the presence of Molans and certified by the Beneficiary Companies, on the face of the Assignment, as having their approval and consent."
"I have introduced Bank of Commerce to him through our Miami Office. His clients are Columbian Companies dealing in South America and getting their money out of Guatemala and El Salvador. He will only come to St Kitts when he has cash to deposit. We will have to meet him in St Maarten at short notice. The accounts to be opened are [names of five companies, including the Companies]."
The memorandum goes on to stress the need for "utmost secrecy to protect the customer". This may go some way to explaining the arrangements made with the Bank by Mr Molans, Mr Byron and Mr Ross. They were (to say the least) lacking in transparency.
The essential documents
(1) There was a certificate of deposit in a standard printed form, numbered 958, issued by the Bank in favour of Mill Valley Finance Construction Company NV and recording the deposit of $205,000, maturing on 10 December 1981, at an annual rate of 10% until maturity.
(2) There was a similar certificate, numbered 959, issued to Alminton Company NV.
(3) The security agreement was entered into by the Bank (defined as the Debtor) in favour of Dennis Byron (referred to as Trustee and defined as the Secured Party). It was a typewritten document but it appears to have been (apart from the Bank being the debtor rather than the secured creditor) a standard-form document used by the Bank to secure bank lending when there was collateral in the form of shares, stock, bonds or similar property lodged with the Bank. The document was headed "Security Agreement: Secured Party in Possession" and it referred (inappropriately in the circumstances) to the Secured Party exercising its banker's lien. It was not appropriate for an equitable mortgage of real property (there was no reference to letting, rents, rates, repairs or other such matters). It did not make any specific reference to any particular property as forming part of the collateral.
(4) There were two letters dated 6 November 1981 written on behalf of the Bank, one to Mr Molans and the other to Mr Byron. Each was signed on behalf of Mr Walwyn by Mr R D H Lewis, a senior bank official. Each letter acknowledged receipt of the deposits (together with some other deposits not in issue) and each named the Companies as creditors. The letter to Mr Byron also stated "the Bank has given you an equitable mortgage on its premises at The Circus, Basseterre and The White House, St Peter's to secure the said repayments."
Copies of these two letters were not included in the record as originally prepared and certified, but copies of them (together with other documents that are in the original record) were admitted before the Board, without opposition, in order to enhance the record.
"WHEREAS the Transferor, acting in his capacity of Solicitor for James A. Molans (duly authorized agent and Attorney for ALMINTON COMPANY, N.V. and for MILL-VALLEY FINANCE CONSTRUCTION COMPANY, N.V.) did, by document under seal dated the 6th day of November, 1981, and entitled 'SECURITY AGREEMENT: SECURED PARTY IN POSSESSION', which document together with other related correspondence signed on the same date as part of the same transaction are attached hereto as Schedule 'A', become an equitable mortgagee of certain lands and premises and identified in Schedule 'A' attached hereto;
AND WHEREAS pursuant to the terms and conditions as expressed in the said 'Security Agreement', the security was held by the Transferor on trust from ALMINTON COMPANY, N.V. and for MILL-VALLEY FINANCE CONSTRUCTION COMPANY, N.V. jointly and severally;
NOW THIS AGREEMENT WITNESSETH THAT in consideration of the premises and other good and valuable consideration to the Transferor, receipt of which is hereby acknowledged, the Transferor, with the approval and consent of ALMINTON COMPANY, N.V. and MILL-VALLEY FINANCE CONSTRUCTION COMPANY, N.V. as represented by these presents, hereby sell, assign and transfer unto the Transferee and without restricting the generality of the aforementioned, any and all rights and/or privileges, current and/or contingent and the like, at law and/or in equity, to the Transferee, and that the documents referred to in the Schedule including the said memorandum have been handed to the said Transferee to the intent that the within-mentioned sums of Two Hundred and Five Thousand (US$205,000) United States Dollars and Two Hundred and Five Thousand (US$205,000) United States Dollars respectively as described in Schedule 'A' together with interest thereon and all related cost, fees and expenses and the securities therefore should be, and the same are transferred to the said Transferee."
Schedule A consisted of the documents included in the bundle admitted before the Board in order to enhance the record (some of which were already in the record).
The judgments below
"This case is largely about the force and effect of documents. For example the assignment of the agency, the deposit certificates, letters promising to pay the sums due on the certificates, whether the Companies ratified or passed resolutions approving the assignment of the agency or indeed approved the agency agreement in the first place. The Liquidator is focused on the form of these documents it seems and not on the substance of the entire course of dealings."
"At its highest, as a result of the 1982 Agreement, the respondent stood in the shoes of Sir Dennis. Not only is there an absence of a perfect documentary trail to the ownership of the beneficial interest in the US$410,000, there is no documentary trail at all."
He went on to point out that a fiduciary owner is not permitted to take the trust property for himself, even if the only beneficial owner has ceased to exist.