Circle Corporation Ltd v Chase Manhattan Bank N.A.

• Jurisdiction: British Virgin Islands
• Court: High Court (British Virgin Islands)
• Judge: Joseph, J.
• Judgment Date: 11 September 1984
• Neutral Citation: VG 1984 HC 9
• Docket Number: Civil Suit no. 121 of 1983
• Date: 11 September 1984

High Court of Justice

Joseph, J

Civil Suit no. 121 of 1983

Circle Corp Ltd

and

Chase Manhattan Bank N.A.

Appearances:

Mr. L.S. Archibald Q.C., and Mr. Farara for plaintiff.

Mr. McWelling Todman Q.C., and Mr. Webster for defendant.

Company Law - Debenture — Floating Security.

Facts: A deed of debenture was executed by the plaintiff in favour of the defendant in consideration of the defendant lending money to the plaintiff. By clause 1 of a deed the borrower covenanted to pay the principal sum or part thereof on demand. By clause 7 the deed provided that money should become immediately payable in any of the specified events. By clause 3 the plaintiff charged its undertaking and property by way of a floating security. The terms of repayment was observed by the plaintiff. The defendant demanded payment of the outstanding amount and interest.

Held: The plaintiff covenant to pay on demand in clause was limited to clause 3. None of the events specified in clause 7 had occurred. The defendant's demand was improper. Judgment for plaintiff.

Joseph, J.

1 The plaintiff alleges that on 7th May, 1980 it executed a deed of debenture in favour of the defendant in consideration of the defendant lending a sum of $216,000 to the plaintiff: that the terms of repayment were stipulated in the deed which provided in clauses -1 and 7 as follows –

2 Clause 1:

The Borrower covenants with the Bank that the Borrower will on demand pay to the Bank the said Principal Sum or such, part thereof as now is or as shall from times to times be awing by the Borrower or by the Borrower jointly with another in partnership or otherwise and whether as principal or surety to the Bank anywhere upon banking account or upon any discount or other account or for any other matter or thing whatsoever including interest discount commission and all other banking charges and so that interest shall be computed according to the usual mode of the Bank in dealing with loan accounts as well as after and before judgment obtained hereunder.

3 Clause 7:

The Principal moneys hereby secured shall become immediately payable in any of the following events:

• (a) If the Borrower make default for ninety days in the payment of any interest hereby secured and the Bank before such interest is paid by notice in writing; to the Borrower call in the said principal moneys.

• (b) If distress or execution be levied or issued against the Borrower and is not paid off within seven days.

• (c) If the Borrower shall cease or threaten to cease to carry on business.

• (d) If the receiver shall be appointed of the Borrower's assets or any part thereof.

4 The plaintiff further alleges that it has observed the terms of repayment: that none of the events outlined in clause 7 has occurred to cause the principal money to become due: and that the demand for repayment of the loan made by the defendant is improper. It claims that it has lost business as a consequence of the unlawful making and maintenance of the demand for full payment, at the rate of not less than $20,000 per month: claims the sum of $100,000 to the date of filing the statement of claim, that is 11th May 1984, and that it continues to lose. It claims –

• (1) a declaration that a demand in writing dated 30th November 1983, made by the defendant as bankers, upon the plaintiff, their customers, to pay $170,734.06 plus interest under a Debenture No.73 of 1980 by 7th December, 1983, is unlawful, null, void and of no effect.

• (2) an injunction to restrain the defendants whether by themselves or by their servants or agents or otherwise howsoever from interfering with the plaintiff's business or property or howsoever, situate or held in pursuance of the demand or as threatened in the said demand or otherwise.

• (3) damages for breach of contract.

5 The defendant in its defence (filed on 22nd May 1984) denies any loss of business as claimed by the plaintiff and states that it would explain at the trial the meaning of clause 7.

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