KHI (Seychelles) 01 Ltd & Anor v Elite Club Ltd (MA 275/2018) [2019] SCSC 1214 (29 May 2019)

IN THE SUPREME COURT OF SEYCHELLES Reportable [2019] sese ~:J./t MA275/2018 (Arising in 275/2018) KHI (SEYCHELLES) 01 LTD Petitioner TRADING AS RAFFLES PRASLIN (rep. by Serge Rouillon) and ELITE CLUB LIMITED l " Respondent (unrepresented/absent) DANNY BONTE TITE MORIN (both represented by Basil Hoareau) 21l(IRespondent 3rd Respondent Neutral Citation: KHI (Seychelles) 01 Ltd vElite Club and others (MA275/20 18) [2019] sese 4:L';t Before: Summary: Heard: Delivered: ( 30th May 2019). Vidot J Petition for summons to show cause for default of a judgment debt, liability of directors for debt of the company and matters to be contained in affidavit 12 March 2019 30 May 2019 VIDOT J RULING [I] By a judgment dated 28th September 2017 in case no. CCI3/2017 (2017 SCSC 884) between the same parties, this Court ordered the Ist Respondent to pay the Petitioner the sum of€118,315.65 plus interest in the sum of€4235.58 and continuing at 12% per annum on a compound basis with cost of the suit. Cost was taxed at SRI 7,923.00. [2] The pi Respondent failed to pay the judgment debt. The Petitioner has filed a petition asking for (i) the execution of the judgment against the 1st Respondent who are controlled by their directors, the 2nd and 3rd Respondents by the issue of summons to the to the lSI Respondent and their directors the 2nd and yl Respondents to appear and show caLIse why the directors of the 151 Respondent should not be committed to civil imprisonment for its failure to pay the said judgment debt; and (ii) the 1st Respondent who are controlled by their directors be directed to pay the costs of the proceedings. [3] The Petition is supported by an affidavit sworn by Grant Weaver, Director of Finance with the Petitioner company. The affidavit rehearses the fact that the parties had been before court and that judgement was entered against the 151 Respondent in favour of the Petitioner and that the former has defaulted in satisfying the judgment debt. The Petitioner wants to enjoy the fruits of the judgment. It calls on the court to issue summons on the Respondents and the 2nd and 3rd Respondents to show cause as to why they should not be committed to civil imprisonment. [4] The 2nd and 3rd Respondents in an Affidavit in Reply objected that a summons to show cause should be issued against them on 4 grounds. They are; (i) The 151 Respondent is a company registered under the Companies Act; (ii) That as directors they cannot be committed to prison, for the I SI Respondent enjoys separate legal personality from them. The l" Respondent being the judgment debtor and as such the directors cannot be rendered personally liable for the debt of the 1st Respondent nor for failure of the l" Respondent to pay its debt; (iii) That the Petitioner has not established any grounds to lift the corporate veil so as to render the 2nd and 3rd Respondents personally liable for the debt of the 1st Respondent, and (iv) That the Petition was wrongly brought against them. [5] . The 1st and 2nd Respondents further claim that the Affidavit in support of the Petition is defective in that it has failed to distinguish what part of the affidavit is based on knowledge and what part is based on information and belief [6] I have stated in the judgment or 28th September 2017 that it is afundamental principle of company law and commerce that a limited liability company is an entity separate and distinctfrom its shareholders and directors. It has its own legal personality. Therefore a company will normally be treated as solely responsible for debts it incurs and the obligations which it enters into, notwithstanding that it requires individuals, who normally would be its directors, to act as agents and enter into arrangements creating rights and liabilities for the company. Company law operates on the basis that when directors act on behalf of the company, they do so as agents; see Swiss Renaissance v General Insurance [1999J SLR 17. This means that directors who act as agent of a company will not incur personal rights or obligations to the counterparty under a contract unless explicitly provided for. Directors may be rendered bound to a contract in their personal capacity if the Directorsfail to make known to those with whom they are dealing that they are acting as director ofthe company rather than in their individual capacity. Ifa director personally guarantees obligation of a company such director will incur personalliability. " [7] Directors may however be made responsible debts of the company, if they have acted fraudulently. Another instance would be in the event of a winding up of a company if any act of misfeasance can be established. [8] The judgment debt is against the 151 Respondent, Elite Club Limited. The 2nd and yd Respondents as directors did not personally guarantee obligations of the company in the event of liability being established against it. There has been no fraud alleged against the directors. Therefore, the 151 and 2nd Defendants remain independent and not liable for the debt of the 151 Respondent. [9] I also consider the objection raised in regards to the affidavit in support of the Petition. At paragraph 10 of the affidavit Grant Weaver states that "the averments made in the attached Petition and this affidavit are true and correct 10 / he best ofmy informat ion, knowledge and belief" Counsel for the 151 and 2nd Respondents referred to Union Estate Management (Proprietary) Limited v Herbert Mitterrnayer 11979J SLR 140, in which it was stated thus; "I agree with the contention 0/ Mr. Inamdar that an affidavit which is based on information and belie/must disclose the source of information and the grounds of belief It is therefore necessary for the validity of an affidavit that the affidavit should distinguish what part of the statement is based on knowledge and what part is based on informal ion and belief and that the source of that information or grounds of belie/should be disclose. " Unfortunately, the affidavit falls foul of such requirements and therefore could not be relied on. [10] Based on the above I dismissed the Petition and make no order as to cost. Signed and delivered at Ile du Port, on this 30l'd day of May 2019 /~." Vielot J 4