Pashtany Tejaraty Bank v BCCI (Overseas) Ltd

• Jurisdiction: Cayman Islands
• Judge: (Sanderson, J.)
• Judgment Date: 23 October 2002
• Court: Grand Court (Cayman Islands)
• Date: 23 October 2002

Grand Court

(Sanderson, J.)

PASHTANY TEJARATY BANK

and

BANK OF CREDIT AND COMMERCE INTERNATIONAL (OVERSEAS) LIMITED

E.D. Simpson for the plaintiff;

R. McMillan for the defendant.

Cases cited:

(1) Bank of Credit & Commerce Intl. S.A. (No. 10), In re, [1997] Ch. 213; [1996] 4 All E.R. 796, followed.

(2) Black-Clawson Intl. Ltd. v. Papierwerke Waldhof-Aschaffenburg A.G., [1975] A.C. 591; [1975] 1 All E.R. 810, considered.

(3) Harris v. QuineELR(1869), L.R. 4 Q.B. 653; 38 L.J.Q.B. 331, referred to.

(4) Jensen v. Tolofson, [1994] 3 S.C.R. 1022; [1995] 1 W.W.R. 609, distinguished.

(5) Suidair Intl. Airways Ltd., In re, [1951] Ch. 165; [1950] 2 All E.R. 920, followed.

Legislation construed:

Loi No. 85-98 du 25 Janvier 1985 relatif au redressement et à la liquidation judiciaires des entreprises, art. 53: The relevant terms of this article are set out at para. 3.

Décret No. 85-1388 du 27 Decembre 1985 relatif au redressement et à la liquidation judiciaires des entreprises, art. 6: The relevant terms of this article are set out at para. 3.

Companies-compulsory winding up-winding up of international group-in context of global liquidation proceedings, Cayman rules of procedure apply to proof of claim in Cayman liquidation, not rules applicable to liquidation in foreign jurisdiction where debt arose, especially if primary liquidation here

Conflict of Laws-procedure-time-limit-onus on defendant pleading foreign time-limit to prove that foreign legislation substantive in nature and therefore applicable as lex causae in Cayman proceedings dealing with foreign debt

Companies-compulsory winding up-winding up of international group-time-limit for creditors” claims in foreign liquidation procedural and therefore governed by domestic law in Cayman liquidation proceedings-test whether provision affects right (substance) or remedy (procedure) inappropriate for insolvency legislation-limitation intended to expedite administration of estate, not prevent prejudice to defendant

The plaintiff applied for payment of its proof of debt in the Cayman liquidation of an international banking company.

The plaintiff, an Afghan bank, had deposited a sum of money with the Paris branch of BCCI (Overseas) Ltd. The provisional liquidator of the company in France informed the plaintiff shortly after his appointment in July 1991, that a declaration of claim should be addressed to the creditors” representative in Paris. The plaintiff”s request in September for the moneys in its accounts with the bank to be transferred to another bank received no response from the provisional liquidator.

The plaintiff later sent the English liquidators of BCCI S.A. a proof of claim for the sums deposited in France, indicating that it had filed a proof of claim there in February 1992. They forwarded the claim to the Cayman liquidators of BCCI (Overseas) Ltd. It was returned in June 1992 with the advice that the plaintiff submit a board resolution authorizing the signatures on its proof of debt, documentation to support its claim and a proof of debt form filed against BCCI (Overseas) Ltd. rather than BCCI S.A. The Cayman liquidators later wrote saying that they had not received the proof of debt form, enclosed one for completion, and also suggested that the plaintiff approach the Paris branch directly with its claim. In December 1992, the plaintiff filed a proof of debt with the Paris branch and re-filed one in the Cayman Islands.

In June 1995, the French liquidator informed the plaintiff that its claim had been filed out of time and therefore could not be approved. Although in 1997 the Cayman liquidators told the plaintiff that claimants against the French branch were eligible to receive dividends from the Cayman liquidation estate, further correspondence in 2000 informed it that its claim in the Cayman liquidation was extinguished by virtue of the limitation provisions of the French bankruptcy legislation.

The relevant provisions were to the effect that foreign creditors had four months in which to notify the creditors” representative of their claims, beginning with the date of publication of the court order commencing liquidation proceedings, and that the representative should inform them of this fact within eight days of the order, outlining the legislation in question and explaining how to proceed. Under another provision, a judge could, in response to an action commenced by a creditor within one year of the court”s order, counter that creditor”s exclusion by the deadline, if the creditor showed that it was not at fault in making a late claim. Otherwise the claim was extinguished.

The plaintiff submitted that its claim was not subject to the French limitation period, since (a) in an international insolvency case the Grand Court should apply its own domestic law and rules of procedure in a Cayman liquidation, whether the liquidation was the main liquidation or ancillary to a foreign one; alternatively (b) a time-limit prescribed to achieve a speedy winding up rather than to prevent stale claims or prejudice to a defendant, and which affected remedies rather than rights, was a procedural matter under Cayman law, and therefore to be governed by domestic rules; (c) French bankruptcy law was of no effect outside French liquidation proceedings; or (d) the time-limit was a procedural matter under French law and therefore inapplicable here.

The Cayman liquidators submitted in reply that the French limitation period effectively barred any claim in the Cayman liquidation, since (a) the contract under which the moneys were deposited with the Parisian branch was governed by French law and, under Cayman conflict of laws rules, the court had to apply French law; (b) the limitation period was substantive rather than procedural because its effect was to extinguish substantive legal rights; and (c) accordingly, it should take precedence over local rules and practice.

Held, ordering that the plaintiff”s proof of claim be admitted:

(1) The court was satisfied that the French time-limit was a procedural matter rather than a substantive one. The traditional common law test of whether the legislation in question extinguished a right (substantive) or merely impaired a party”s remedy (procedural) was inappropriate where bankruptcy or insolvency legislation was concerned. Such legislation was often largely procedural in nature, and the time-limits contained in it were unlike other limitation periods, as they were intended not to exclude stale claims and prevent prejudice to defendants by extinguishing causes of action, but to ensure that the estate could be administered expeditiously and legitimate creditors paid promptly (paras. 27–29; para. 34; paras. 37–39).

(2) Even if this conclusion were wrong under Cayman law, the time-limit was properly to be regarded as a procedural matter under French law. The Cayman liquidator, having raised the time-limit as a defence, bore the burden of proving the state of foreign law, and had failed to establish that the limitation under French bankruptcy legislation was a substantive matter (paras. 40–41).

(3) The Cayman liquidation was the main or primary liquidation in the international winding up of BCCI (Overseas) Ltd., since the company was registered here. The liquidation of the French branch, in which the bank”s assets realized there were ‘ring-fenced’ so as to be unavailable to creditors outside France, could be regarded as collateral and independent proceedings. The Cayman proceedings were not subsidiary to them. Since the authorities showed that even in a liquidation properly regarded as ancillary to a foreign one, the court would apply its own domestic rules of procedure to resolve issues brought before it, this principle applied a fortiori in a primary liquidation. By this means, the same procedural rules of insolvency practice, including time-limits, would apply to all creditors claiming within the jurisdiction of the liquidation, to the extent permitted by international law. The defendant”s rejection of the proof of claim would be reversed (paras. 19–20; paras. 24–25; paras. 35–36; para. 42).

1 SANDERSON, J.: The plaintiff had approximately US$1,800,000 on deposit with a French branch of the Bank of Credit & Commerce International (Overseas) Ltd. (‘BCCI(O)’), when it went into receivership. The issue before the court is whether the plaintiff”s claim filed in the liquidation proceedings here is time-barred pursuant to the provisions of the bankruptcy legislation in France.

Facts

2 The plaintiff is a bank situated in Afghanistan. The defendant is the liquidator of BCCI(O), a bank registered in the Cayman Islands. BCCI(O) had a branch office in Paris in which the plaintiff had deposited approximately US$1,800,000. On July 22nd, 1991, the defendant was appointed provisional liquidator of BCCI(O) in the Cayman Islands. On July 23rd, 1991, Mr. Andre Forde was appointed provisional administrator of BCCI(O) in France. On July 29th, 1991, Mr. Andre Forde wrote to the plaintiff. The letter stated that Maître Carrassett-Marillier had been nominated as representative of the creditors and that a declaration of claim should be addressed to her.

3 The relevant legislation in France regarding the filing of a claim is as follows (in translation):

‘Article 6 of December 27, 1985 Decree relating to Companies” Court reorganization and liquidation, in its version enforceable in 1992.

In the deadline of eight days from the opening of the court reorganization proceedings, the creditors” representative shall inform all the known creditors that they shall notify to him their claims, within the deadline of two months from the publication in the BODACC of the court order to...