First Caribbean International Bank (Barbados) Ltd and another v Interested Creditors (Saint Lucia)

In a company liquidation, competing hypothecs rank according to the order of registration. A first registered charge therefore takes priority over later judicial hypothecs, subject to any applicable statutory privilege.

A receiver does not incur personal liability under consent orders merely because, as the company’s authorised manager, the receiver negotiated them. The orders must impose an obligation on the receiver or otherwise constitute a contract entered into by the receiver.

The privilege for expenses incurred for the common interest of creditors does not extend to expenses incurred by a secured receiver while advancing the appointor’s interests. Procedural limits on oral argument are permissible where substantial written submissions have been received.

Sunset Village Inc, a company in liquidation in Saint Lucia, had granted the Bank a first registered hypothecary charge over its principal development asset. Disappointed purchasers later obtained consent orders for damages against the company and registered them as judicial hypothecs.

The High Court directed that creditors be paid pari passu. The Court of Appeal reversed that decision, holding that the Bank’s first registered security had priority. The Interested Creditors appealed to the Privy Council, arguing principally that the consent orders represented expenses personally incurred by the receiver and therefore had priority, and alternatively relying on estoppel and procedural unfairness.

The central issues were whether the receiver had incurred personal liability, whether any expense was privileged as incurred for the common interest of creditors, and whether the Bank’s security had priority.

The Board advised Her Majesty that the appeal should be dismissed.

1. Priority of securities. Under the complementary provisions of Saint Lucia’s Companies Act, Commercial Code and Civil Code, hypothecs rank according to the order of registration. The Bank’s first registered hypothecary charge therefore had priority over the later judicial hypothecs represented by the Consent Orders.
2. Receiver’s liability and indemnity. Section 297(1) of the St Lucia Companies Act makes a receiver personally liable on contracts entered into in performing the receiver’s functions, subject to an indemnity from the relevant assets. The Consent Orders identified SV as the defendant and imposed judgment obligations on SV. They did not name the receiver or impose any obligation on him. His authorised participation in negotiating them did not make them contracts entered into by him. His indemnity was therefore not engaged.
3. Privileged expenses. Article 1969 of the Civil Code of St Lucia exempts specified privileges from registration. Article 1903, paragraph 1, gives priority to law costs and expenses incurred for the common interest of creditors. The receiver’s negotiation of the Consent Orders did not satisfy that description. At the relevant time he was acting as the Bank’s receiver, advancing the Bank’s interests rather than those of SV’s general creditors. The Board referred to the legal advice given to the receiver, which cited In re Potters Oil [1986] 1 WLR 201 at 206, and found no reason to suppose that he had acted otherwise than in accordance with it.
4. Estoppel and procedure. Estoppel could not create priority because the Consent Orders created no privileged expenses, the Bank was not party to them, and no relied-upon representation was established. The Court of Appeal was entitled, as a matter of case-management discretion, to limit oral submissions after receiving substantial written submissions. The Board declined to decide whether the Consent Orders provided security against unsecured creditors, since that issue was not raised by cross-appeal or properly addressed and had no practical significance.

• Privy Council: On 14 March 2022 the Board dismissed the Interested Creditors’ appeal.
• Court of Appeal of the Eastern Caribbean Supreme Court (Saint Lucia): By order dated 20 September 2018, the court allowed the Bank’s appeal, dismissed the Interested Creditors’ counter-notice and held that the Bank’s first registered security had priority.
• High Court of Saint Lucia: Following a contested hearing on 18 October 2016, the court directed that, after preferential creditors and liquidation expenses, SV’s creditors be paid pari passu.