Anklesaria v BCCI (Overseas) Ltd

• Jurisdiction: Cayman Islands
• Judge: (Murphy, J.)
• Judgment Date: 25 May 1999
• Court: Grand Court (Cayman Islands)
• Date: 25 May 1999

Grand Court

(Murphy, J.)

ANKLESARIA

and

BANK OF CREDIT AND COMMERCE INTERNATIONAL (OVERSEAS) LIMITED

S.J. Barrie for the appellant;

Ms. S. Dobbyn for the respondent.

Cases cited:

(1) American Express Co. v. Anadarko Bank & Trust Co.ELR(1937), 67 P. (2d) 55; 110 A.L.R. 972, distinguished.

(2) Braithwaite v. Thomas Cook Travellers Cheques Ltd., [1989] Q.B. 553; [1989] 1 All E.R. 235.

(3) City National Bank of Galveston v. American Express Co.(1929), 16 S.W. (2d) 278, distinguished.

(4) El Awadi v. Bank of Credit & Commerce Intl. S.A. Ltd., [1990] 1 Q.B. 606; [1989] 1 All E.R. 242.

(5) Fellus v. National Westminster Bank Ltd., [1983] T.L.R. 448; (1983), 133 New L.J. 766.

(6) Kentwood Constrs. Ltd., In re, [1960] 1 W.L.R. 646; [1960] 2 All E.R. 655n, applied.

(7) Trepca Mines Ltd., In re, [1960] 1 W.L.R. 1273; [1960] 3 All E.R. 304n.

Legislation construed:

Bills of Exchange Law (Revised) (Laws of the Cayman Islands, 1963, cap. 11, revised 1978), s.3(1): The relevant terms of this sub-section are set out at page 282, lines 18–22.

s.29(1): The relevant terms of this sub-section are set out at page 283, lines 18–26.

Insolvency Rules 1986 (S.I. 1986/1925), r.4.83(1):

‘If a creditor is dissatisfied with the liquidator”s decision with respect to his proof … he may apply to the Court for the decision to be reversed or varied.’

Companies-compulsory winding up-creditors-proof of debt-on challenge to liquidator”s rejection of proof of debt under Insolvency Rules 1986, r.4.83, court may if necessary rehear case de novo with further evidence

Bills of Exchange-travellers” cheques-status-travellers” cheque is bill of exchange within meaning of Bills of Exchange Law (Revised), s.3(1) even though drawer and drawee are same, and signature and countersignature of purchaser required for enforcement

Bills of Exchange-travellers” cheques-unsigned cheques-recipient has no rights against issuing bank-not holder in due course within meaning of Bills of Exchange Law (Revised), s.29(1) unless cheques complete on face, obtained for value and without notice of defect in title-bank”s omission to ensure cheques signed by purchaser and terms of purchase irrelevant

The appellant appealed to the Grand Court against the rejection of a proof of debt by the liquidators of the respondent bank.

The appellant allegedly organized a hunting trip for the royal family of Abu Dhabi in his home country of Pakistan. In return for his services, an unidentified representative of the royal family paid him US$400,000 in VISA travellers” cheques issued by the respondent. The cheques were unsigned by the purchaser and the appellant claimed that it would have been socially unacceptable for him to question such a payment made on behalf of the royal family. No receipts or invoices in respect of the hunting trip existed, but it was confirmed that the cheques had been issued to a representative of Abu Dhabi royalty.

The purchase agreement for the cheques provided that the purchaser should sign each cheque and later countersign it in the presence of the person cashing it. A similar provision for payment appeared on the reverse of each cheque. The appellant attempted to cash the cheques both in Pakistan and England by signing and countersigning them himself, but payment was refused.

The respondent bank went into liquidation and the appellant submitted a proof of debt to its liquidators, describing himself as the purchaser of the travellers” cheques but later amending this description to acceptor of the cheques. In the absence of documentation to confirm how the

appellant came by the cheques, the liquidators refused to admit his proof of debt.

On appeal under the Insolvency Rules 1986, r.4.83, he submitted that (a) the travellers” cheques were bills of exchange and therefore enforceable by the holder in accordance with their terms and with the Bills of Exchange Law (Revised) as unconditional orders; (b) provided the signature and countersignature matched, the cheques could be cashed even though the purchaser had not signed them; (c) the purchase agreement charged the purchaser with safeguarding them against misuse and stated that the bank was not required to stop payment merely because the signatures were not those of the purchaser; and (d) the bank could not refuse payment on the cheques unless it could establish that they were stolen, since it had failed in its duty to ensure that they were signed before release.

The bank submitted in reply that (a) since the travellers” cheques were negotiable only according to their terms, namely, when countersigned by the purchaser whose signature appeared on each cheque, payment could not be enforced other than by the purchaser or a named payee (or his order); (b) since the appellant could not show that he was a ‘holder in due course’ within the meaning of s.29(1) of the Bills of Exchange Law (Revised), he did not hold the bill free from all defects in title affecting it and could not enforce payment; (c) the appellant could not rely on the terms of the purchaser”s contract with the bank, since he was not a party to it; and (d) the bank”s default in issuing the cheques to the purchaser without signature was irrelevant to the appellant”s rights.

Held, dismissing the appeal:

(1) The court had power, in deciding whether the liquidators had properly rejected the appellant”s proof of debt, to rehear the matter de novo upon fuller evidence than had been available to the liquidators. Accordingly, it had ordered the attendance of the parties for cross-examination upon their affidavits (page 277, lines 7–19).

(2) The travellers” cheques were to be regarded as bills of exchange within the meaning of the Bills of Exchange Law (Revised), s.3(1) notwithstanding that the drawer and drawee were the same and the condition that the purchaser sign and countersign them before payment could be obtained, which was merely a term of negotiation. They were in any event commonly treated as negotiable instruments by commercial usage, payment being enforceable by a named payee or by the purchaser himself, provided that the latter had signed and countersigned them (page 282, line 4 – page 283, line 12).

(3) The liquidators had properly rejected the appellant”s proof of debt, since he had no title to the cheques and therefore no rights against the bank as issuer in the absence of compliance by the purchaser with the terms of negotiation. Although a defect in the chain of title could be cured in favour of a holder in due course as defined by s.29(1) of the Bills of

Exchange Law (Revised), the appellant did not fall within this category of holder, as the bills were not complete on their face, he had not proved that he had received them for value, they had not been negotiated to him and he was aware of this. The appellant could not, either under the express terms of the cheques or the Law, stand in the place of the purchaser merely because the bank had omitted to ensure that the cheques were signed when they were issued. Nor did the terms of the purchase agreement signed by the purchaser avail the appellant, since he was not a party to it and it was in any event an underlying contract which could not determine the enforceability of the cheques as bills of exchange. Accordingly the appeal would be dismissed (page 283, line 15 – page 284, line 3; page 285, line 14 – page 286, line 7).

MURPHY, J.: This is an appeal pursuant to r.4.83(1) of the Insolvency
Rules 1986 from a decision of the liquidators of the respondent
45	Bank of Credit and Commerce International (Overseas) (‘BCCI(O)’),

communicated by letter dated May 17th, 1996, rejecting the appellant”s
proof of debt received on March 15th, 1993. The debt claimed is
US$400,000 in VISA travellers” cheques issued by BCCI(O), of which
the appellant is the holder.
5	The appeal was lodged by originating application (with no return date
specified) dated June 20th, 1996. The appeal, however, did not proceed.
The matter came before me on October 22nd, 1998 after the liquidators
applied to dismiss the appeal for want of prosecution. On that date I
instead made an order for directions for the hearing of the appeal,
10	including the delivery of affidavits and the attendance of deponents for
cross-examination. At the hearing before me both the appellant, who had
travelled from Pakistan, and Timothy Krivoshen, a manager employed by
the liquidators with responsibility for assessing creditors” claims, were
briefly cross-examined.
15	On this appeal I am of course not limited to deciding whether the
liquidators were right, on the evidence before them, in reaching their
decision to reject the proof of debt. I can decide the appeal by way of a
rehearing de novo, on fuller evidence, and that is what I have done: see In
re Kentwood Constrs. Ltd. (6) and In re Trepca Mines Ltd. (7).
20
Background facts
The appellant, a Pakistani national, contends that he was given
US$400,000 in VISA travellers” cheques (400 x US$1,000 denomination)
by members of United Arab Emirates royalty in return for organizing a
25	hunting expedition in Pakistan in or around late 1990. As will be seen, the
cheques were not signed or countersigned by the actual purchaser thereof,
but instead came into the appellant”s possession in blank. It was the
appellant who signed the cheques in both places and made the claim on
that basis.
30	In his letter of June 6th, 1993 to the liquidators of BCCI(O) in
England, the appellant advised that:
‘During 1989 a royal party from UAE visited Pakistan and spent
three months on hunting trips in different parts of the country. I was
requested by the Crown Prince to assist them with their travel, food
35	and other hunting arrangements.
These traveller [sic] cheques were

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