Baksh General Wholesalers Ltd v. Republic Bank Ltd (Trinidad and Tobago) [2004] UKPC 46 (06 October 2004

	Privy Council Appeal No. 19 of 2003

Baksh General Wholesalers Limited	Appellant
	v.
Republic Bank Limited	Respondent

	FROM

	THE COURT OF APPEAL OF 
TRINIDAD AND TOBAGO
	---------------

	JUDGMENT OF THE LORDS OF THE JUDICIAL
	COMMITTEE OF THE PRIVY COUNCIL,
	Delivered the 6th October 2004
	------------------

	Present at the hearing:-
			Lord Bingham of Cornhill
Lord Clyde
Lord Scott of Foscote
Lord Rodger of Earlsferry
Lord Walker of Gestingthorpe
		  	[Delivered by Lord Walker of Gestingthorpe]
	------------------

1.	This appeal arises out of action taken by a mortgagee, Republic Bank Ltd (“the Bank”, so as to include its predecessor Bank of Commerce Trinidad and Tobago Ltd) to enforce its security for money advanced to the mortgagor, Baksh General Wholesalers Ltd (“the Company”).  The disputed events occurred between August 1992 and February 1993.  Proceedings were taken by the Company over five years later, on 17 July 1998.  On 2 November 1999 the trial judge (Narine J) held that the Bank had unlawfully entered and was in unlawful occupation of the Company’s premises.  He granted an injunction against any sale by the Bank, and ordered the Bank to pay damages (to be assessed in Chambers).  The Bank appealed to the Court of Appeal, which on 9 November 2001 allowed the appeal with costs and set aside the judge’s order, for reasons given on 23 November 2001. The Company appeals to the Board with final leave granted on 17 June 2002.

2.	The managing director and principal shareholder in the Company is Mr Tajmool Ali-Baksh.  He lived with his wife and family at a house at Warren Munroe Trace, Warrenville. This house belonged to the Company and formed part of the mortgaged property.  Closely adjacent to the house, and comprised in the same title, was a warehouse from which the Company carried on business as a wholesaler of dry goods of various sorts, including foodstuffs and household requisites.  The company owned four motor vehicles and employed a number of staff.

3.	On 7 July 1986 the Company granted a debenture to the Bank. It was in a familiar form, creating fixed first charges on the Company’s freehold and leasehold property and its goodwill and a first floating charge on its other assets, as security for the payment on demand of all monies owing by the Company to the Bank.  By Clause 3 of the debenture the Company could enforce the security (among other circumstances) either (sub clause (a)) on demand being made or (sub clause (e)) if the Company ceased to carry on business or disposed of a substantial portion of its assets.  The debenture was initially stamped to secure $900,000 but this sum was increased, first in 1988 and again (to a total of $2,000,000) in 1991.

4.	On 17 March 1988 the Company granted the Bank a mortgage by way of collateral security, the mortgaged property being the house and business premises already mentioned.  Since the existing debenture contained a fixed first charge on all the Company’s land, this mortgage did no more than simplify conveyancing on any eventual sale by the Company (since unlike the debenture it contained a specific description of the premises).  

5.	The banking relationship between the Company and the Bank did not run smoothly.  A letter dated 18 August 1992 from Mr Khan (the manager at the Bank’s Valpark Branch, where the Company’s accounts were kept) to Mr Ali-Baksh recorded a meeting between them on 14 August 1992.  The letter referred to the unsatisfactory operation of the Company’s overdraft account. The Company was issuing cheques without regard to whether funds were available.  It had engaged in deceptive practices, in collusion with another local businessman, to give an exaggerated impression of its turnover. The Company was advised to reconsider slow-moving lines of stock and its levels of staff and vehicles.  Finally the letter recorded, 
“The conversion of the overdraft balance to a loan and amalgamate to the existing Demand Loan.  You would therefore concentrate on one repayment per month and your current account would operate in credit.  Cheques would only be issued when funds are available.”

6.	In his oral argument on behalf of the Company, Dr Ramsahoye SC put in the forefront of his case the submission that at the meeting on 14 August 1992 the parties entered into an enforceable oral agreement that so long as the Company made the regular monthly payment referred to in the letter (the amount of which was agreed to be $42,452 odd) the Bank would not take steps to enforce its security.  However the letter of 18 August 1992 is inconsistent with any such agreement.  Moreover it was not part of the Company’s pleaded case at trial.  As Mr Higham QC (for the Bank) pointed out, the Company’s original statement of claim had come close to pleading such an agreement.  But the relevant paragraph (para 8) was deleted on amendment, and the amended pleading did not aver any term (express or implied) to that effect. That is not surprising since such an agreement would have been against the Bank’s commercial interests and would have lacked business efficacy: see (in relation to an alleged agreement not to take possession of the mortgaged property) the observations of Scarman LJ in Western Bank Limited v Schindler [1977] Ch 1, 17.

7.	Quite soon after the August meeting Mr Khan called for another meeting with Mr Ali-Baksh.  They met on 9 September 1992, and the meeting is recorded in a letter dated 15 September 1992 written by Mr Khan.  The Bank urged the Company to sell two of its motor vehicles to raise at least $100,000 by 30 September 1992, and to raise $15,000 a month from bulk sales so as to reduce its inventory of slow-moving stock.  Mr Ali-Baksh said in his evidence in chief,
“In my mind I did not agree as it would hamper the daily running of my business.”

In the event there was no sale of vehicles before 30 September, and on 1 October 1992 the Bank made a formal written demand for payment.  It did not however take immediate steps to enforce the security, either by the appointment of a receiver or otherwise.

8.	Soon afterwards the Company did sell two of its vehicles, and it is common ground that it succeeded in paying $100,000 on 6 October 1992 and (between 21 September 1992 and 1 February 1993) paid the Bank five sums of $42,452 odd and four sums of $15,000.  The Bank received these on a without prejudice basis. Had matters continued in this way, the Bank would no doubt have refrained from taking steps to enforce its security.  It would have refrained from doing so not because it was contractually bound to, but because the Company would have belatedly complied with the Bank’s requirements and shown itself to be a reliable customer.

9.	On 4 February 1993, however, events took a dramatic turn. Since September 1992 Mr Khan had made a practice of calling at the Company’s premises in order to keep an eye on the business. In the last week of January 1993 (probably on 28 January) Mr Khan paid a visit and all seemed well.  But his evidence was that when he called again on 4 February the warehouse appeared to be deserted.  Its large doors were locked shut.  The neighbours could not give him any information as to the whereabouts of Mr Ali-Baksh and his wife.  He looked into the ground floor of the warehouse through a crack between the doors and observed (in the words of the judge’s notes),
“That the stock, what you consider to be the majority of the stock, was missing.”

In cross-examination Mr Khan agreed that he could not see the entire ground floor, but disagreed that most of it was outside his vision.  It was suggested in argument before their Lordships that Mr Khan gave positive evidence that he saw some stock in the warehouse.  But from the judge’s notes his evidence seems to have been that he saw no stock; he was however prepared to accept the possibility that there was some stock in the parts of the ground floor which he could not see.

10.	Mr Khan was alarmed by what he saw and consulted his head office, which arranged for security guards to attend at the premises later on the same day.  Mr Khan was not there when the guards arrived and he could not give evidence of their activities. The evidence of Mr Seeteran, a Chartered Accountant whom the Bank appointed as receiver on or about 10 February 1993, and who attended at the premises on 12 February, was that the guards did not have the key to the locked warehouse.  On 12 February the guards (acting on the receiver’s instructions) cut off the locks with a hacksaw, and the receiver installed new locks to which he had the keys.  This evidence is consistent with Mr Khan’s evidence that the warehouse was locked when he arrived on 4 February.

11.	The receiver’s evidence was that he inspected the warehouse and that it had “absolutely no stocks of any kind” either downstairs or upstairs.  The offices in the warehouse were also empty.  There were no accounting records or books or records of any sort.  The receiver never received any payment in respect of the Company’s business and never paid any outgoings.  His receivership ended after about a year in circumstances which were not explained in the course of the evidence.

12.	Against this evidence the trial judge had to set the evidence which had already been given on behalf of the Company by Mr Ali-Baksh and his son Tariq.  Mr Ali-Baksh said that he left Trinidad on 2 February 1993 to take his wife to seek medical attention in the United States of America.  Two days later he heard by telephone from his adult daughter Fazeeda that the Bank had “taken over the premises” and he told his daughter to instruct his attorney.  The attorney did write promptly to Mr Khan, and later to the Bank’s attorneys, the first letter being sent on 5 February 1993. Mr Ali-Baksh’s evidence was that he returned to Trinidad on 21 March 1993.  By then a writ had been issued against the Bank naming himself, his wife and his daughter as plaintiffs; an injunction had been obtained and the family had been allowed into occupation of the house.

13.	In cross-examination Mr Ali-Baksh said that he had not complained in writing to the Bank about the removal of stock worth (on his evidence) about $3 million.  He did not contact Mr Khan.  Over the years he saw advertisements for the sale of the premises, but no sale was ever effected.  Mr Ali-Baksh did not give any evidence about the disappearance of the stock beyond saying that, so far as he was aware, the warehouse was not empty on 4 February 1993.  But it is common ground that he had left Trinidad two days before.

14.	The only evidence for the Company as to what happened after Mr Ali-Baksh’s departure came from Tariq Baksh, who was then aged 19 and on a fortnight’s break from school.  He said that when his father went abroad he (Tariq) was made responsible for collecting debts and orders, and that he went out to customers to do this.  He could not remember what orders he took.  He probably prepared fewer than ten bills.  He said that when he left on the morning of 4 February 1993 the warehouse was fully stocked. When he returned to the premises later that day the security guards were at the premises and told him to go away.  He said that his father was not away for more than three weeks (his father’s evidence was that he returned on 21 March 1993, that is after nearly eight weeks’ absence).

15.	The Company has not traded since 4 February 1993.  Nor has any further payment of principal or interest been made by the Company to the Bank.  

16.	There was therefore an acute conflict of evidence, which it was the trial judge’s duty to resolve.  He made some attempt to do so, but (in common with the Court of Appeal) their Lordships find his reasoning and conclusions unsatisfactory.  He accepted Mr Ali-Baksh’s evidence as to the reason why he left Trinidad, but apart from that he made little attempt to weigh up the credibility of the witnesses or to test their evidence against the probabilities, or against contemporaneous documents (in his oral evidence Mr Ali-Baksh mis-stated the effect of each of the Bank’s letters of 18 August, 15 September and 1 October 1992).  The judge regarded the receiver’s evidence as contradicting that of Mr Khan, but any disparity in their evidence as to the absence of stock was accounted for by the fact that the receiver obtained access to the premises and inspected both floors, which Mr Khan had been unable to do.  The receiver said that Mr Khan was present on 12 February 1993.  Mr Khan merely said that he returned to the premises a few days after 4 February.  He does not seem to have been asked (either in chief or in cross-examination) whether he had accompanied the receiver on 12 February.  Their Lordships do not perceive any serious inconsistency between the evidence of these two witnesses as recorded in the judge’s notes.  Both were busy professionals giving evidence of events which had occurred six years before.

17.	Most crucially, the judge made no finding about the evidence of the son, Tariq.  He had been left in charge of the business in his parents’ absence, which may have been a considerable burden to put on the shoulders of a schoolboy.  His evidence was that he attended to the Company’s business on 2 and 3 February 1993, after his parents’ departure, and presumably was responsible for securing the business premises.  His evidence was that the Company’s two drivers were not working on 4 February (a Thursday).  His evidence made no sort of positive case to explain the disappearance of the stock.  By 12 February the warehouse had been guarded by security guards for a week, but (unless both Mr Khan and the receiver were perjuring themselves for no obvious purpose) it had been locked with locks to which neither Mr Khan, nor the receiver, nor the security guards had a key.  If the Company had made exceptional bulk sales of stock shortly before Mr Ali-Baksh’s departure, he would have been able to obtain documentary evidence from the purchasers to make good any loss of his own records.  If there had been thefts by unsupervised security guards (a suggestion which Dr Ramsahoye deployed before their Lordships without any evidential basis) Mr Ali-Baksh would surely have reacted much more strongly on his return to Trinidad (as it was, no statement of claim was ever served in the first action, nor was the Company ever joined as a co-plaintiff).

18.	The Court of Appeal (in a judgment of Hamel-Smith JA with which Nelson JA and Lucky JA agreed) was properly reluctant to upset a trial judge’s findings of fact.  But it concluded that in this case the judge’s finding (on the issue of the disappearance of the stock) was unreasonable and against the weight of the evidence. Their Lordships consider that the Court of Appeal was justified in that conclusion.

19.	At the beginning of February 1993 the Company was living on borrowed time.  The Bank had made a formal demand and had temporarily held its hand, but was not contractually bound to continue to do so.  When Mr Khan found that the warehouse was empty, or almost empty, it was natural and legitimate for the Bank to take immediate steps to safeguard its security.  The Bank was entitled to take possession, although whether it actually took possession of the premises before 12 February 1993 (when the receiver undoubtedly did take possession) is debateable, since it was not until 12 February that the receiver got the guards to cut off the locks to which the Bank had no key.  The receiver was entitled to take possession.  No real doubt was thrown on the receiver’s appointment.  The Bank omitted to register his appointment with the Registrar General’s Companies Section, an omission which exposed the Bank to a penalty, but did not invalidate the appointment.

20.	In these circumstances the Bank was not in breach of duty in taking steps to enforce its security.  It is not necessary to consider limitation of actions, although the Company’s claim appears to have been statute-barred in any case.  The Court of Appeal was right to allow the Bank’s appeal.  The Company’s appeal to the Board must be dismissed with costs.