Charles Mercer Ltd (in Voluntary Liquidation) v Royal Bank of Canada

• Jurisdiction: Montserrat
• Court: High Court (Montserrat)
• Judgment Date: 06 April 2001
• Neutral Citation: MS 2001 HC 1
• Docket Number: 86 of 1993
• Date: 06 April 2001

Charles Mercer Limited (in Voluntary Liquidation)

and

Royal Bank of Canada

86 of 1993

High Court

Company law - Guarantee — Whether transaction within the objects of the company — Plaintiff claimed a declaration that the guarantee purported to be given by it to the defendant was ultra vices its memorandum and articles of association and was thus invalid and an order that the defendant release to the plaintiff the said properties free of all liens and claims whatsoever — Whether liability of a director of the plaintiff company to the defendant under the guarantee could be incorporated in the debenture as a liability by the company to the defendant — Whether the transaction fell within the objects of the company — Finding that the plaintiff had not satisfied the court that the transaction was ultra vices the company — Judgment for defendant with costs.

Appearances:

Mr. John C. Kelsick for the plaintiff.

Mr. Kenneth Allen Q.C. for the defendant

1 JUDGMENT OF THE COURT: The plaintiff in this originating summons was a limited liability company incorporated and registered under the provisions of the Companies Act of Montserrat with its registered office situate in Plymouth in the said island of Montserrat. In September 1991 the plaintiff went into voluntary liquidation and Wilbur Harrigan of the city of St. John's in the Island of Antigua a chartered accountant and a partner in the accounting firm of Pannel Kerr Foster was appointed liquidator for the purpose of winding up the plaintiff. The defendant is a company registered in the Island of Montserrat and carrying on the business of banking in the said island.

2 By the originating summons filed in this court the plaintiff claimed from the court, among other things, the following reliefs:

• “1. A declaration that the Guarantee purported to have been given by CHARLES MERCER LIMITED by the document captioned “Guarantee and Postponement of Claim” addressed to the ROYAL BANK OF CANADA and executed on 14th June, 1989, under the seal of CHARLES MERCER LIMITED and singed by Cadman Mercer and H.S. Mercer is ultra vires the memorandum and articles of association of CHARLES MERCER LIMITED and is invalid.

• 3. An order that ROYAL BANK OF CANADA release to the plaintiff the said properties free of all liens and claims whatsoever.”

3 There was no affidavit filed with the summons; and indeed there was no evidence supplied for the disposition of the matter until nearly three months after the filing of the summons when the barrister-at-law acting for the defendant swore and filed an affidavit on behalf of the defendant. And it would be enlightening if I set out herein the more relevant paragraphs of that affidavit. Those paragraphs are 1, 3, 5, 7, 8, 9, 10, 15 and 16.

• “1. I am a Barrister-at-Law and Solicitor of the Eastern Caribbean Supreme Court and the Solicitor for the defendant in the above-captioned matter.

• 3. The foregoing not withstanding, I have on the 10th day of June, 1993 searched the records at the Registry of the High Court in respect of this matter and no affidavits have been filed by or on behalf of the plaintiff and apart from the Notice of Appointment to hear Originating Summons dated the 215 day of April, 1993 and filed on the 22nd April, 1993, no affidavits or other forms of evidence have been filed by or on behalf of the plaintiff and no documents in support have been filed, exhibited or exchanged.

5

I rely inter alia on Clause (12) of the objects for which the company is established which reads: “12. A Call shall be deemed to have been at the time when the resolution of the Directors authorizing the call was passed, and may be made payable by instalments.” 7. I will contend further that apart from those documents which the company is required by law to file with the Registrar, the records of Charles Mercer Limited in voluntary liquidation are personal to them and the defendant is under no obligation at any time whatsoever to inquire into the way the said company's meetings were held, where they were held and what decisions were taken at the said meetings. 8. The defendant Bank has been the Bankers of Charles Mercer Limited since its incorporation in January 1969 and prior to that has acted for the family business known as Charles Mercer for several years before the said family took the decision to incorporate; This has always been a company in good standing with good and substantial credit, which had always conducted its. liquidation and pay off all the debts of the company and protect or restore the good name of the company. 10. At the time of such decision, apart from its stock in trade and accounts receivable, the company owned real estate consisting of the premises in which the business of the company was mainly carried on at John & Strand Street, Plymouth and another prominent building on George Street, Plymouth valued together at about $1.4 million. 15. As shown in the letter dated 23rd March, 1992, the majority of the shareholders are absentees and the affairs of the company were run by its Directors as provided for by Articles 86 and 87 of the company's Articles of Association. 16. Regarding the plaintiffs contention that the shareholders received no notice of a meeting, I say with respect that it would make nonsense of commercial practice generally and banking in particular if whenever there was representation made on the part of the company for a financial transaction the bank was obliged to inquire from every shareholder whether they had notice of the proposal and consented to it”.

4 The said barrister-at-law later swore and filed another affidavit which corrected a statement that was made in the first affidavit.

5 Reacting to the affidavit filed on behalf of the defendant the plaintiff then had the liquidator swear and file an affidavit. The relevant paragraphs of the affidavit of the liquidator are 2,3,4,5,6,7 and 8. These paragraphs are in the following terms;

• “2. On or about the 17th day of September, 1991, the shareholders of the private limited liability company known as Charles Mercer Limited of Strand Street, Plymouth, Montserrat, passed a special resolution that the company be voluntarily wound up and that I be appointed liquidator for the winding up.

  ...