Societe Alleck & Cie (Societe Alleck and Co Ltd) v. The Indian Ocean International Bank (Mauritius) [2008] UKPC 62

Judicial Committee of the Privy Council
Case No Privy Council Appeal No 87 of 2007Venue FROM THE COURT OF APPEAL OF MAURITIUS - - - - - - - - - - - - - - - - -
Between
Societe Alleck & Cie (Societe Alleck and Co Ltd)AppellantThe Indian Ocean International Bank (Mauritius)Respondent
Before
Lord Hope of CraigheadLord Rodger of EarlsferryLord CarswellLord ManceSir Paul KennedyDate 15 December 2008
[1]:- Lord Hope of Craighead Lord Rodger of Earlsferry Lord Carswell Lord Mance Sir Paul Kennedy - - - - - - - - - - - - - - - - [Delivered by Lord Rodger of Earlsferry ] There are two appeals before the Board. One of the appellants in each of the appeals purports to be the "Société Alleck & Co Ltd" – a point to which their Lordships will return briefly. The respondent is The Indian Ocean International Bank Ltd ("the Bank"). The issues in the two appeals are the same and arise out of transactions in 1996 and 1998.[2]At the relevant times, a group of entities, all having "Alleck" in their legal name, were engaged in, inter alia, the import of, and wholesale and retail trade in, textile products in Mauritius. Among the entities were two companies, D Alleck & Co Ltd and D R Co Ltd. Mr Danilall Alleck was chairman of the boards of directors of the two companies.[3]There was also another entity in the group, a partnership, Société Alleck et Cie, of which Mr Danilall Alleck was manager.[4]In 1996 D Alleck & Co Ltd wanted to borrow money from the Bank in connexion with its business. As an extract minute of a meeting of the directors on 20 June records, on the proposal of Mr Danilall Alleck it was unanimously agreed and resolved that the company should approach the Bank for a loan of Rs 3 million and that the facility should be secured by a floating charge granted by the company and a "fixed charge by Société Alleck & Cie on 18 per + bldg at St Jean Road Quatre Bornes."[5]A similar minute of the proceedings of the partners of Société 'Alleck & Cie', at the same address on the same date, records that, on the proposal of Mr Danilall Alleck, it was unanimously agreed and resolved that, in consideration of banking facilities for Rs 3 million to be made available to D Alleck & Co Ltd, the said "Société 'Alleck & Cie' authorises the Bank to create a fixed charge for Rs 3m on property of the extent of 18 perches plus bldg at St Jean Road Quatre Bornes as security for the above facility."[6]The Bank did indeed agree to lend the company, D Alleck & Co Ltd, Rs 3 million and, as security, took a floating charge, dated 25 June 1996, over the company's undertaking and assets. The deed records that the debtor company was represented by Messrs Danilall Alleck and Rajesh Alleck. The partnership, Société Alleck & Cie, intervened in the transaction as guarantor or surety for the purpose of securing the repayment of the loan to the Bank. The deed records that the partnership was duly represented by Mr Danilall Alleck. What appear to be his initials have been added at the foot of alternate pages of the deed. In terms of the deed, the surety granted a fixed charge over the 18 perches plus building at St Jean Road, Quatre Bornes, referred to in the previous paragraph.[7]It is undisputed that the deed was duly signed on behalf of the debtor company and the Bank. But, at the point where it purports to be signed on behalf of the guarantor/surety, the signature appears over the name "Soc: Alleck & Sons", which has been applied with a rubber stamp.[8]One of the contentions on behalf of the appellant is that the deed dated 25 June 1996 was signed on behalf of a non-existent entity, Société Alleck & Sons, and, accordingly, was not signed on behalf of the Société Alleck & Cie. Therefore, it is said, the Société Alleck & Cie never became bound as a surety for the loan to the company, and so cannot be liable to the Bank.[9]Following various developments which it is unnecessary to narrate, in December 2001 the Bank served a notice "mise en demeure" on the company as principal and on the Société Alleck & Cie as surety.[10]By proecipe dated 26 April 2002 the company and "Société Alleck & Cie Ltd" began proceedings against the Bank, the broad aim of which was to restrain the Bank from taking any legal proceedings against the applicants or from exercising any right pursuant to the fixed charge over the property referred to in para 5 above.[11]The similar events behind the second action began in 1998. D R Co Ltd, another company in the Alleck Group, wanted to obtain loans from the Bank. By a deed dated 9 April 1998, the Bank agreed to lend D R Co Ltd Rs 13 million. As security for the loan, D R Co Ltd granted a floating charge over its undertaking and assets. Again, Société Alleck & Cie, represented by Mr Danilall Alleck, intervened as guarantors/sureties. Again, he appears to have initialled alternate pages. On this occasion, the deed narrated that the Société granted to the Bank both a floating charge over its undertaking and assets and a fixed charge over the property referred to in para 5 above and a commercial complex in Quatre Bornes.[12]As in 1996, the signature on behalf of the surety/guarantor appeared above the name "Soc: Alleck & Sons".[13]On 14 May 1998 the Bank made a further loan of Rs 1 million to D R Co Ltd. Once more, D R Co Ltd granted a floating charge over its undertaking and assets. Once more, Société Alleck & Cie, represented by Mr Danilall Alleck, intervened as guarantor/surety and granted a floating charge and fixed charge in similar terms to those granted in the deed of 9 April. Once more, the signature for the surety/guarantor appeared above the name "Soc: Alleck & Sons".[14]In this case too, the contention on behalf of the appellant is that the deeds dated 9 April and 14 May 1998 were signed on behalf of a non-existent entity, the Société Alleck & Sons, and, accordingly, were not signed on behalf of the Société Alleck & Cie. Therefore, it is said, the Société Alleck & Cie never became bound as a surety for the loans to D R Co Ltd under those deeds, and so is not liable to the Bank.[15]Again it is unnecessary to detail the events which followed, save to say that, in the case of these loans too, in December 2001 the Bank served a notice "mise en demeure" on D R Co Ltd and the surety.[16]By proecipe dated 26 April 2002, D R Co Ltd and "Société Alleck & Cie Ltd" began proceedings against the Bank, the broad aim of which was to restrain the Bank from taking any legal proceedings against the applicants or from exercising any right pursuant to the fixed charge over the property referred to in para 11 above.[17]On 31 July 2002 K P Matadeen J granted the orders which the applicants sought in both cases, restraining the Bank from taking legal proceedings against the applicants, from proceeding towards the conversion of the floating charges into fixed charges, or from exercising any right pursuant to the fixed charges.[18]The Bank appealed and, on 11 June 2004, the Supreme Court (Y K J Yeung Sik Yuen and P Balgobin JJ) allowed the appeal and set aside the orders granted by K P Matadeen J.[19]In the course of their judgment, the Supreme Court drew attention to a further curious point about names. As is apparent from the preceding narrative, the three deeds record that the Société Alleck & Cie intervened as surety. Therefore, any steps taken against the sureties under those deeds would be taken against the Société Alleck & Cie. One might therefore have expected that the proceedings to stop the steps based on those deeds would have been taken by the principals and by the Société Alleck & Cie. But no. In fact, the proceedings were raised in the name of the principals and "Société Alleck & Co Ltd". As the Supreme Court pointed out, the name "Société Alleck & Co Ltd", involving both the idea of a partnership and the idea of a limited company, is a contradiction in legal terms and, in fact, no such entity can or does exist. So, it can be argued, the actions, so far as the Société Alleck & Co Ltd is concerned, are tainted with nullity. For that reason, the Supreme Court refused leave to appeal to the Board.[20]When asking for special leave to appeal, counsel for the appellants sought to argue that the Supreme Court had erred in holding that the proceedings had been raised by the wrong party. The point was not originally taken by the Bank either at first instance or on appeal. Moreover, in the pleadings the applicant is actually described as a partnership. In the context of this particular case, the error in the name appeared to be simply yet another unsatisfactory technical oddity. The Board therefore decided to leave that technicality on one side, to grant special leave to appeal to the Société Alleck & Cie, and to confine the appeal to two grounds.[21]The first of these grounds can be disposed of speedily. The contention of Mr Ollivry QC was indeed that, because the stamp below the signatures for the surety in each of the three deeds gave the name "Société Alleck & Sons", rather than "Société Alleck & Cie", the partnership was not bound as surety. Like the Supreme Court, the Board is quite unable to countenance that suggestion.[22]As their Lordships have narrated, in the body of the deed the surety is correctly described as the "Société Alleck & Cie", represented by Mr Danilall Alleck. That gentleman was plainly involved in a variety of capacities at all stages in these transactions. So he was in a position to know exactly what took place. It is therefore significant that he did not swear an affidavit to deny either that he signed the deeds or that he signed them on behalf of the Société Alleck & Cie, whom he was representing. The only affidavit dealing with the matter comes from Mr Sudesh Alleck, a partner in the firm, and he avoids saying anything at all about Mr Danilall Alleck's role in signing the deeds.[23]So the entire argument, that the Société Alleck & Cie is not bound as a surety, depends on the point that, when Mr Danilall Alleck signed the deeds, he did so above the name "Société Alleck & Sons" which was inserted by the use of a rubber stamp. In the absence of any evidence to the contrary, the only proper inference is that this rubber stamp was in the possession of Mr Danilall Alleck, the manager of Société Alleck & Cie, and was used by him to insert the name of the entity on whose behalf he was signing, when he was purporting to sign on behalf of Société Alleck & Cie.[24]One conceivable interpretation of these facts would be that, on each occasion, Mr Danilall Alleck was using the stamp with a different name in order to deceive the Bank, in a deliberate effort to prevent the partnership becoming liable as surety. Their Lordships tend to prefer the simpler explanation that, when he used the rubber stamp in that name, Mr Alleck fully intended to sign on behalf of the partnership. It may be, as was suggested during the hearing before the Board, that he was using a rubber stamp with an English version of the partnership's name. Whatever the correct explanation, the Board is satisfied that Mr Danilall Alleck must be taken to have signed the deeds on behalf of the Société Alleck & Cie, the partnership which he was representing. This ground of appeal must accordingly fail.[25]The other ground of appeal also relates to the position of the partnership as the surety (in French "caution") in each of the transactions. The point requires a little more explanation.[26]In its original form, article 1326 of the Code Civil of Mauritius mirrored article 1326 of the French Code Civil and provided:
"Le billet ou la promesse sous seing privé par lequel une seule partie s'engage envers l'autre à lui payer une somme d'argent ou une chose appréciable, doit être écri en entier de la main de celui qui le souscrit ; ou du moins il faut qu'outre sa signature il ait écrit de sa main un bon ou un approuvé portant en toutes lettres la somme ou la quantité de la chose ; Excepté dans le cas où l'acte émane de marchands, artisans, laboureurs, vignerons, gens de journée et de service."
[27]By the Loi no 80-525 of 12 July 1980, this version of article 1326 of the French Code Civil was repealed and replaced by an article in these terms:
"L'acte juridique par lequel une seule partie s'engage envers une autre à lui payer une somme d'argent ou à lui livrer un bien fongible doit être constaté dans un titre qui comporte la signature de celui qui souscrit cet engagement ainsi que la mention, écrite de sa main, de la somme ou de la quantité en toutes lettres et en chiffres. En cas de différence, l'acte sous seing privé vaut pour la somme écrite en toutes lettres."
Precisely the same change was made in Mauritius three years later by section 44 of the Code Napoléon (Amendment No 3) Act 1983.[28]In 2000, article 1326 in the French Code Civil was further amended by the Loi no 2000-230 of 13 March 2000. The words "de sa main" were deleted and replaced by the words "par lui-même". That amendment has not been made in article 1326 of the Mauritius Code, but the point is not of significance for present purposes.[29]There is no doubt that the surety clauses in the three deeds were provisions by which the Société Alleck & Cie unilaterally undertook to pay a sum of money to the Bank. As such, other things being equal, they would fall within the terms of the new article 1326. It is equally clear that the sums in question were not written, either in numbers or in letters, in handwriting. In these circumstances Mr Ollivry argued that the requirements of article 1326 were not met and so the Bank could not rely on the terms of the deeds as proving the relevant obligation of the surety. At most, the Bank could use the deeds as a starting point for proving the relevant obligations.[30]In advancing this argument, Mr Ollivry accepted that, until the reform of article 1326, the strict requirements would not have applied to the undertaking by Société Alleck & Cie because the partnership would have been a "marchand" and the text contained an exception which applied to acts emanating from, inter alios, "marchands". But that exception is not to be found in the new article 1326 and so, he contended, its requirements now apply to undertakings by a merchant such as the Société.[31]On behalf of the Bank, Mr Chetty accepted, of course, that the exception for the acts of merchants was no longer to be found in article 1326. He submitted, however, that it had been deleted on the view that it was no longer needed since the necessary relaxation of the requirements in article 1326 was to be found in article 109 of the Code de Commerce. Again, a little of the background must be sketched in.[32]Article 109 of the Code de Commerce as it applied in France before 1980 was in these terms:
"Les achats et les ventes se constatent: Par actes publics, Par actes sous signature privée, Par le bordereau ou arrêté d'un agent de change ou courtier, dûment signé par les parties, Par une facture acceptée, Par la correspondance, Par les livres des parties, Par la preuve testimoniale, dans le cas où le tribunal croira devoir l'admettre."
In 1980, by the same Loi no 80-525 of 12 July 1980, this version of article 109 was deleted and replaced by an article in these terms:
"A l'égard des commerçants, les actes de commerce peuvent se prouver par tous moyens à moins qu'il n'en soit autrement disposé par la loi."
[33]In Mauritius, however, the 1983 Act only updated the Code Civil and so it was not until two years later that the original version of article 109 of the Code de Commerce, which had been in the same terms as the original version of article 109 in the corresponding French Code, was deleted and replaced by a provision in the same terms as the new article 109 in the French Code: section 8 of the Code de Commerce (Amendment) Act 1985. In moving the second reading of the Bill which became the Act, the Acting Prime Minister explained that the opportunity had been taken to update certain articles whose wording had been archaic. The example he gave was article 109. The aim was to put it into modern terms, without changing its meaning: Hansard 26 March 1985, col 645.[34]In the meantime, the new version of article 109 of the French Code de Commerce has become article L110-3 in the revised French Code de Commerce which was introduced by the ordonnance no 2000-912 of 18 September 2000. The text remains unchanged, however. So article 109 of the Mauritius Code now corresponds to article L110-3 of the French Code.[35]On its face, the old version of article 109 of the Code de Commerce, which dealt with modes of proof, applied only to contracts of sale. But, in a decision in 1892, the cour de cassation boldly decided that the application of the article could be generalised so as to permit courts which had to make findings of fact "en matière commerciale" to use any methods of proof established by law – even ones not listed in the article: cass civ 1er, 17 mai 1892, DP 92.1.604. Put shortly, as the Acting Prime Minister was to say in relation to the 1985 reform in Mauritius, the purpose of the French legislation of 1980 was to clarify the situation by replacing the previous text of article 109 with a version that would reflect its effect as declared by the cour de cassation. See G Parléani, "Un texte anachronique: le nouvel article 109 du code de commerce" D 1983, chron, p 65; Y Chartier, "La preuve commerciale après la loi du 12 juillet 1980 ou Le législateur propose et la loi dispose", in J-P Delmas Saint-Hilaire, E Du Pontavice, Aspects du droit privé en fin du 20e siècle: études réunies en l'honneur de Michel de Juglart (1986), p 95, at pp 95-96.[36]In fact, however, as these authors demonstrate, it soon emerged that the scope of the new provision was, in at least one way, more limited than the scope of the provision which it had replaced. Whereas the old version had been interpreted as applying "en matière commerciale", ie in any case where the matter was commercial, the opening words of the new text limit it to cases where the "actes de commerce" are those of "commerçants" (à l'égard des commerçants).[37]Mr Chetty's submission was that, even if the scope of the new article 109 was narrower, the obligations of the Société Alleck & Cie under the three deeds still fell squarely within its terms. The article accordingly governed the position.[38]Certainly, the Société Alleck & Cie, like the other members of the group, was engaged in commerce. So the Bank is indeed seeking to invoke article 109 à l'égard d'un commerçant, as is required by its opening words. Next, the whole context of the transaction between the Bank, the companies and the Société was commercial. As already mentioned, all the entities in the Alleck Group, including the Société Alleck & Cie, were engaged in commerce at the relevant time. Not only did the Société become surety in the course of its business, but the partners had an interest in the affairs of the companies whose debts the partnership was guaranteeing. In these circumstances entering into the contract of cautionnement was plainly an "acte de commerce" on the part of the Société: cour comm 26 mai 1999. In these two respects the requirements for the application of article 109 are accordingly met.[39]So article 109 applies - unless the law provides otherwise. Mr Ollivry's contention was that the law, in the shape of article 1326 of the Code Civil, does indeed provide otherwise in a case like the present. So the formal requirements to be found in article 1326 must be satisfied.[40]Their Lordships reject that contention. Once the effect of the old article 109 of the Code de Commerce had been generalised by the cour de cassation in 1892, that article would have served to relax the requirements of proof in the case of an obligation of suretyship "en matière commerciale". So the specific exception for merchants in article 1326 would have, in effect, been redundant in any case of that kind. In practice, of course, the position may have appeared more doubtful and so, to that extent, the specific exception may have remained useful. The purpose of the revisions of the two codes was to eliminate doubts of that kind by enacting a clear provision.[41]In France the revision of article 109 of the Code de Commerce and of article 1326 of the Code Civil took place simultaneously in 1980. So, when the exception in relation to merchants was omitted from the new article 1326, the position in "actes de commerce" was to be regulated by the new article 109. In Mauritius, by contrast, there was a two-year period between the revision of article 1326 and the revision of article 109. In that period, with the specific exception for merchants having been removed from article 1326, any relaxation of the requirements would have had indeed to be found in the old version of article 109, which had been held to allow freedom of proof "en matière commerciale". That situation came to an end when the new article 109 was introduced by the 1985 Act. From then on, the position has been the same as in France.[42]Simply having regard to the developments which they have outlined and the aim of the legislative changes, their Lordships would have been prepared to hold that article 109 of the Code Commercial should apply in this case, where the contract of cautionnement is an acte de commerce - and that article 1326 of the Code Civil is not a provision to the contrary. But, in any event, there is clear support for that view in two decisions of the chambre commerciale of the cour de cassation and the related jurisprudence: 21 juin 1988, JCP 1989, II 21170 (note Delebecque); 15 novembre 1988, D 1990 3 (note Ancel). Their Lordships acknowledge the assistance they have derived from these authorities. They accordingly conclude that, because article 109 of the Code de Commerce applies, the fact that the obligation of the Société Alleck & Cie is not set out in a manner that complies with the requirements of article 1326 of the Code Civil does not matter.[43]For these reasons, and in agreement with the reasoning of the Supreme Court in relation to both grounds of appeal, the Board dismisses the appeal with costs.