AND

                                             F. & M. KHOURY               Plaintiffs-Appellants

    v.

NAJIB TEYMANI TRADING UNDER THE NAME AND STYLE OF THE STAR STORES

                                                                                         Defendant.

A. G. LEVENTIS & CO.                                                Claimants-Respondent   

                                                    (CONSOLIDATED)

 

 

Appeal in the case of two consolidated interpleaded proceedings ­Question of validity of previous Letter of Hypothecation granted by Defendant to 1st Respondents-Subsequent Bill of Sale granted to 2nd Respondents.

Held: The Letter of Hypothecation was a valid document and is construed as meaning that the goods, or proceeds of such goods, if and when realised, shall be distributed two rata amongst all the creditors of the defendant, that is, in a similar way to the distribution of a bankrupt's goods under the English Bankruptcy Laws.

(2) The document in question is not a Bill of Sale under the Bills of Sale Act, 1854.

(3) The said document is unaffected by the Bill of Sale subsequently given to the 2nd respondents, who must rank pro rata and pari passu with all the other creditors (not necessarily only judgment creditors).

(4) The appellant may not raise in his supplementary grounds of appeal a completely new point of fact which was not raised in the Court below and which, if it had been raised there, could and would have been investigated there.

Tile Tasmania (15 A.C. 223).

Karunaratne II. Ferdinandus (1902 A.C. 405)

North Staffordshire Railway II. Edge (1920 A .C. 254) followed on the last point.

The facts are fully set out in the judgment.

R. E. Phipps (with him A. G. Heward-Mills) for Appellants.

J. H. Coussey for 1st Respondents.

F. Dove (with him C. C. Lokka) for 2nd Respondents.

The following joint judgment was delivered ;-

KINGDON, C.]., NIGERIA, PETRIDES, C.J., GOLD COAST AND GRAHAM PAUL, C.J., SIERRA LEONE.

This is an appeal against a judgment of the Divisional Court in two consolidated interpleader proceedings. These interpleader proceedings were taken in respect of the execution done by attac ment under a writ of fl. fa. of moveable properties by F. & MI Khoury, the appellant, upon the judgment obtained by them' their suit against one Najib Teymani.

The first interpleader proceedings were taken by Messrs. Jam Colleqge and L. W. Young, trading as Adolphus Beer & Company who are the first claimants-respondents in this appeal. The second interpleader proceedings were taken by Messrs. A. G, Leventis & Company, the second claimants-respondents in this appeal.

The facts of the case are simple enough and not materially in dispute. The questions of law involved are very much simple than the extraordinary length of the arguments submitted to the Court would suggest. These questions of law relate to the competition between the attachment by writ of execution 011 Messrs. Khoury on the one hand and documents granted by the judgment-debtor to Beer & Company and to Leventis & Company respectively, on the other hand. Beer & Company and Leventi & Company accept the judgment of the Court below as it stands' neither of them has appealed against it; and there is n controversy in this appeal between them.

The goods in question were by the judgment of the Court below handed over to the Chief Registrar of the Court as Receiver and the goods or the proceeds of the sale of them by the Receiver, are the subject of these proceedings.

At the time when the goods were attached under Messrs.

Khoury's writ of execution they were, as to part, in the premise of Teymani and, as to part, in the premises of Messrs. Khoury wh directed the Sheriff to attach all the goods of Teymani in hi premises and in their own, which was done.

The attachment by Messrs. Khoury was begun on 14t September, 1939, and against that attachment Beer & Company set up Exhibit" A .. a "Letter of Hypothecation" granted in their favour under seal by Teymani on 23rd March, 1939. The effect of that document is the most important issue in the case and may be first dealt with. It is in the following terms :-

                                        "THE STAR STORES,              4265/39,

" General Merchants.

" P.O. Box 565, ACCRA.

" 27th March, 1939.

"To-

" JAMES COLLEGE & L. W. YOUNG .. Trading in partnership as

" Adolphus Beer and Company.

" DEAR SIRS,

•• In consideration of your continuing my account with you and of your granting or continuing to grant me further facilities, I hereby hypothecate to you as security, without prejudice to other creditors, for all amount due now from me to you or may from time to time at any time hereafter owe to you, and for any liability to you; all imported goods and merchandise in my stores at Accra, Kumasi, Suhum, Koforidua, Saltpond and Ho in the Gold Coast and the value of which I estimate to be not less than £20,000.

"Until payment and satisfaction of all liabilities as aforesaid, I undertake to hold the said goods and merchandise and the proceeds from same when sold in trust for you and on demand to deliver to you or your order the said goods and merchandise as specified above and on demand to pay to you the proceeds thereof as and when the goods and merchandise are disposed of in the ordinary course of business and if required to warehouse the said goods and merchandise in your name and under your control or as you may direct and to pay the usual proper storage charges.

.. This is to be a continuing security notwithstanding any settlement of account or otherwise and it is to be in addition to and without prejudice to any security which you may now or hereafter hold from me or on my account over the said goods and merchandise for the above purpose. I give you the power for sale at such time or times and in such manner as you may think proper without prejudice to other creditors to whom I owe.

" I undertake to keep the goods and merchandise fully insured against fire and other risks and to hold the policy in trust 011 your account and ·in case of loss to collect and pay the insurance money to you.

" Yours faithfully,

"(Sgd.) N. TEYMANI - LS)."

•• Witness:

•• (Sgd.) M. CANTARZIS.

"P.O. Box 51, Accra,"

The Court below has held that Exhibit " A" was a valid document and has construed it "as meaning that the goods, or proceeds of such goods, if and when realised, shall be distributed pro rata amongst all the creditors of the said Najib Teymani, that is, in a similar way to the distribution of a bankrupt's goods under the English Bankruptcy Laws'!' The appellants attack that construction, and also the validity of Exhibit" A."

Although Exhibit" A " might have been more definitely and clearly expressed" there can be no doubt that the construction placed upon it by the Court below is the only possible construction. Moreover the effect of that construction in. this case has so clearly avoided undue preference among creditors that the Court would be justified in being astute to secure such a construction. It is quite true that Beer & Company's local attorney and their solicitor at first tried to put a different construction on Exhibit "A" (e.g. in Exhibits" D " and" J ") but that fact could not alter the meaning or effect of the document granted by Teymani.

The validity of Exhibit "A" is also attacked by the appellants in their grounds of appeal. The main basis of attack is that Exhibit " A" is a Bill of Sale within the meaning of the Bills of Sale Act, 1854; that under section 70 of the Courts Ordinance that Act applies to the Gold Coast Colony'; and under that Act Exhibit " A " is invalid for lack of registrar There is a simple and complete answer to that point. Accepting the construction placed upon it by the Court below it is  by that Exhibit  A" is within the exceptions specified in the Act, being an " Assignment for the benefit of the creditors of person making or giving the same." (section 7 of the Act) that it is therefore not a Bill of Sale under the Bills of Sale, Act 1854. The applicability of that Act to the Gold Coast, in connection, does not therefore arise.

That disposes of the main contention of the appellant regards Exhibit " A " ; and it. may be noted parenthetically when Exhibit " A" was tendered in evidence in the Court b no objection was taken by appellants' Counsel to it being receive in evidence on the ground that it was invalid for non-registration or on any other ground.

As from the date of Exhibit " A " it follows that the goods covered by Exhibit "A" were properly assigned to Bee Company as Trustees in trust for all the creditors of Teymani including Beer & Co., in security for payment of their dl From 23rd March, 1939, the goods were held by Teymani in 1 for Beer & Company who were themselves trustees for all creditor under Exhibit "A," and any dealing by Teymani with t goods, except in the ordinary course of business, was by virtue of  Exhibit" A" a breach of trust. It cannot be suggested that granting to another creditor of a Bill of Sale affecting these goods or the pledging of any of these goods to another creditor, C within the description .of " the ordinary course of business."

On 15th June, 1939, however Teymani did grant to Lev( & Company a Bill of Sale (Exhibit " L ") and it is this Bill of on which Leventis & Company found. In regard to that .Bill of  Sale the learned Judge found. that there was now owing Leventis & Company the sum of £478 lIs. Id. The lea Judge further found, and quite rightly, in regard to Exhibit" that it was later in date than Exhibit" A " so that the latter priority "over it." Taking that finding, which is in dispute along with the learned Judge's construction of Exhibit " already quoted, it is clear that Exhibit " L " cannot affect Ex] " A" so as to prejudice other creditors by giving Levent Company a preference over other creditors. It is clear

Leventis & Company must rank pro rata and pari passu with other creditors of Teymani, and the learned Judge (on his findings as to Exhibit" A " and Exhibit" L ") was wrong to Leventis & Company a preference in respect of Exhibit" L ", which he has rightly held that Exhibit "A " has priority .

It is also necessary to refer to the pledging of goods covered  by Exhibits" 01 " and" 02 " and" PI " and" P2 " by Teymani to Messrs. Khoury. That was a pledging by Teymani of goodsin his possession in trust under Exhibit " A " and in breach of Khoury that trust. Beer & Co. as trustees having the legal estate in the Teymani goods under Exhibit" A " would. clearly be entitled to follow the etc. & or~. trust property into the hands of Messrs. Khoury, but they might Khoury have had to proceed, as to the goods pledged, by an ordinary suit Teymani. and not by interpleader proceedings. That difficulty, however, etc. & ors. was completely removed by the act on of the appellants themselves in giving up their pledge and specifically instructing the Sheriff to attach the goods in their possession as goods in their possession for and on account of the judgment-debtor. That is to say their possession became in law the possession of the judgment-debtor, and therefore brought within the ambit 'of the interpleader proceedings the question whether the possession of these goods was or was not subject to the trust set up by Exhibit" A." The goods which had been pledged to Messrs. Khoury were therefore, at the time of attachment, in the same position ad hoc as the other goods.

The whole issue is therefore reduced as regards all the goods to the one question whether, at the time of the attachment, the judgment-debtor's possession was, to quote the relevant express words of Order 44 Rule 25 (1) " not (·n his own account, or as his own property, but on account of, or in trust for" Beer & Company under and by virtue of Exhibit " A." It has 'been difficult to follow the somewhat lengthy argument of appellants' ~counsel directed apparently to show that the Court could not, in the interpleader proceedings, enquire into and determine that issue in spite of the explicit words of the rule quoted expressly defining that as one of the issues in interpleader proceedings.

Having investigated that question the Court below rightly came to the conclusion that Exhibit "A " was valid and rightly construed its meaning as already quoted from the judgment of the Court below. It followed that the possession of the judgment ­debtor or of Messrs. Khoury on his behalf was possession in trust for Beer & Company under Exhibit " A."

The Court below however in applying its own correct construction of Exhibit " A " to the facts made a slight slip in holding that the trust was for judgment-creditors only. There is no such restriction in Exhibit " A," nor is distribution of assets in English bankruptcy practice so restricted. The Receiver must pay all creditors of Teymani pro rata and pari passu. He will, of course, have to be satisfied as to the debt due to each creditor but he may not in every case consider it necessary to put the creditor to the expense of obtaining a judgment. The judgment of the Court below should be varied to that effect.

In this connection another point raised by appellants' Counsel in this Court may be shortly disposed of,-the point that the Court erroneously ordered proceeds of sale to be shared to persons who were not parties to the proceedings." That of course i reference to the creditors of Teymani other than the three W were parties to these proceedings. There is no substance whatever in that point. In the Court below Beer & Company were trust for all creditors and claimed in that capacity-as is shown Exhibit" A " and their affidavit (which was expressly adopted their pleading in the Court below). The trustees could in law, a~ did, in fact, represent all the cestuis que trust in these proceeding~ taken to protect the trust property. All that the Court below did was to substitute a Receiver for Beer & Company as trust' and to order him to proceed with the administration of the trust in the interests of the cestuis que trust under Exhibit" A," namely all the creditors of Teyrnani.

A short reference may be made to the rather specious poi sought to be raised by the appellant at the eleventh hour in t Court in his supplementary grou!1ds of appeal, namely, that the was no evidence before the Court as to what portion of the goods attached by the Sheriff was comprised in the Letter of Hypothetion (Exhibit" A").

There;> were unfortunately no written pleadings in the proceedings, but in their affidavit in support of the interplead, Beer & Company made it quite clear that they averred that the goods attached were covered by Exhibit" A." At the out of the trial that affidavit was expressly adopted by Counsel for Beer & Company as his opening and neither in his plea in answer, to that opening, nor in his cross-examination of the c1aimanf witnesses, nor in the evidence he himself led, nor in his argument  at the close of the trial, did the appellants' Counsel by a sing word ever suggest that there were among the goods attached an: which were not covered by the description in Exhibit" A." Iii whole of the trial proceeded, according to the Record, on t~ footing accepted by all parties that the documents Exhibit " A and Exhibit "L" did, if valid, cover the goods attached. anything to the contrary had been suggested in the Court below evidence could have been taken on the point. There is no evidence that after the date of Exhibit " A " any goods were put into this judgment-debtor's stores. When Exhibit " A .. was tendered the Court below appellants' Counsel did not object that it w inadmissible on the ground that there was no evidence to show that it related to the goods in question in the proceedings in the Court below. If that objection had been taken it would no daub^' have been upheld and Exhibit "A" would have been mark for identification only until the claimants had brought the necessary evidence which no doubt they would have done.

The trial having proceeded on the basis indicated it would be most unjust to allow the appellant to raise by his tardy supplementary grounds of appeal in this Court a completely new print of fact which was not raised in the Court below and which, if  it had been raised there, could have been, and would have been, investigated by the Court below. This is well settled law and is exemplified by the cases of The Tasmania (15 A.C. 223), Karunaratne v. Ferdinandus (1902 A.C. 405), and North Staffordshire Railway v. Edge (1920 A.C. 254).

There was some evidence in the Court below and a large volume of argument in this Court about the legal effect of certain padlockings of the judgment-debtor's store. It is impossible to find either in the evidence or in the argument anything to show that by the various padlockings or breaking of padlocks any legal change of possession took place. It would seem therefore that the padlocking, the breaking of padlccks, the evidence and the lengthy argument on the point were all equally a waste of time.

The learned Judge in his judgment expressed with some vigour his views as to the unsatisfactory state of the law in this Colony as to the distribution of assets of insolvent debtors. There can be no two opinions on that subject .. In any case of insolvency in this Colony there is a race, and a race uncontrolled by law or rule, between the creditors to obtain preferential treatment for their claims. It is perfectly true, as the learned Judge has pointed out, that an unscrupulous insolvent may himself award undue preference by admitting one claim and allowing judgment and execution to proceed on it while he holds up others by bogus defences. That is certainly a subject requiring the attention of the legislature.

It is ordered that the judgment of the Court below be varied only to the effect that the nett proceeds of sale of the goods attached are to be distributed by the Receiver among all the creditors (not necessarily only judgment creditors) of Najib Teymani pro rata and pari passu, and that A. G. Leventis & Co., the second claimants-respondents, are not to receive preferential treatment. The first claimants-respondents (Messrs. Adolphus Beer & Company) are to have the costs of this appeal against the appellants. These costs are assessed at £78. The appellants and the second claimants-respondents (A. G. Leventis & Company) are to bear their own costs in this Court.