IN THE SUPREME COURT OF SEYCHELLES

Civil Side: CC 69/2015

       [2018] SCSC 802

JAMES LESPERANCE
Plaintiff

versus

1. ALLAN ERNESTINE

2. MARIE-ALICE ERNESTINE

3. EDEN ENTERTAINMENT  (REP BY ALLAN ERNESTINE AND MARIE-ALICE ERNESTINE IN CAPACITY AS DIRECTOR AND SHAREHOLDER)
Defendant

Heard:                              

Counsel:                      Elvis Chetty for plaintiff

                                    Clifford Andre for defendant

Delivered:                   5th September 2018

JUDGMENT

Pillay J

[1]       The Plaintiff prays the Court for an order as follows:

i)         order specific performance of the said share transfer agreement ordering the 3rd Defendant to comply with all of its obligations thereunder within 14 days of judgment.

ii)        in the event that the 3rd Defendant is unable or unwilling to perform its legal obligations under the said share transfer agreement, to order the lifting of the corporate veil and to order the 1st and 2nd Defendant to discharge the obligation of the 3rd Defendant to the Plaintiff under said share transfer agreement.

iii)       order the 1st, 2nd and 3rd Defendants jointly and severally to pay the Plaintiff damages in the sum of SCR 1, 500, 000.00 together with interest  and costs.

[2]       The Defendants denied the allegations made against them and filed a Defence averring that the Plaintiff substantially misrepresented the financial affairs of the 3rd Defendant. However neither of them nor counsel put up appearance at the hearing resulting in the case being heard ex-parte against them.

[3]       The Plaintiff testified that he is in business and knows the 1st, 2nd and 3rd Defendants. He further testified that the 1st and 2nd Defendants are shareholders and directors of the 3rd Defendant.

[4]       He added that the 3rd Defendant was originally owned by him and Shana Victor which he sold to the 1st and 2nd Defendants before the casino started.

[5]       On 29th August 2013 the 3rd Defendant took out a loan of SCR10.2 million from Nouvobanq for which he provided one of his companies, Souvenir Apartments, as security.

[6]       Again on or around 29th August 2013 the 3rd Defendant took another loan from Nouvobanq in the value of SCR3.2 million. In order to secure the loan the Plaintiff provided his property H6353 as collateral.

[7]       On or around 10th December 2014 the Plaintiff sold the 1st and 2nd Defendants his shares in the 3rd Defendant for the value of SCR 3 million.

[8]       He contends that his intention was to sell the company for SCR 3 million rupees and to have the mortgages on his property removed which has not been done.

[9]       It was his evidence that the 1st and 2nd Defendants have paid him SCR 2 million already through Mr. Padiwalla. This I note is in line with clause 4 (i) of the Share Transfer Agreement.

[10]     The issue for the Court now is whether the 3rd Defendant is liable to pay the balance of SCR 1 million under the agreement and on the 3rd Defendant’s failure to pay should the corporate veil be lifted and the 1st and 2nd Defendants be made personally liable for the debts of the 3rd Defendant.

[11]     The Shares Transfer Agreement, PE2, is dated 10th December 2014.

[12]     By virtue of the Agreement, PE2, the Plaintiff transferred 25 shares to the 1st Defendant and 26 shares to the 2nd Defendant, for the sum of SCR 3, 000, 000.00 of which SCR 2, 000, 000.00 was to be paid upon signing of the share transfer and SCR 1, 000, 000.00 by the 3rd Defendant within 6 months of signing of the Agreement.

[13]     It was further a term of the Agreement that the 3rd Defendant would cause all mortgages to be released from the Plaintiff’s properties – Lesperance Complex by February 2015 and North East Point property by 30th April 2015.

[14]     It is important in my view to get a clear chronology of events:

            *          14th November 2012 the 3rd Defendant was incorporated with 99 shares to                                  the Plaintiff and 1 share to one Shana Victor (PE1)

            *          25th May 2013, 48 shares in the 3rd Defendant was transferred to Four Acres,                 represented by its Director Allan Ernestine, by the Plaintiff (PE3)

            *          23rd December 2015, 26 shares in the 3rd Defendant was transferred to the                                2nd Defendant by Plaintiff

            *          23rd December 2015, 1 share in the 3rd Defendant was transferred to the 1st                      Defendant by one Shana Victor

            *          23rd December 2015, 25 shares in the 3rd Defendant was transferred to the                                1st Defendant by the Plaintiff

[15]     It is clear that on 10th December 2014 when the Shares Transfer Agreement, PE2, was signed, the 1st Defendant, at least, was not a new investor but was in fact consolidating his and his wife’s ownership of the 3rd Defendant by buying out the Plaintiff.

[16]     The agreement PE1 the Memorandum of Incorporation shows that the Plaintiff and Shana Victor are the original directors. However other than PE3 which shows that on 25th May 2013 the 1st Defendant purchased 48 shares in the 3rd Defendant, as a Director of Four Acres, from the Plaintiff, there are no other documents showing who were appointed the Directors of the 3rd Defendant subsequently.

[17]     To my mind the agreement the Plaintiff signed with the 1st Defendant was a Share Transfer Agreement as is indicated, which is a private agreement between two shareholders. The 1st Defendant on signing the agreement signed in his personal name and not as a Director of the 3rd Defendant and in so doing could not bind the 3rd Defendant.

[18]     I am strengthened in this view by the Plaintiff’s averment in paragraph 9 of his Plaint – “The Plaintiff avers that it was a further implied term of the said agreement that the 1st and 2nd Defendant will provide his own assets as security for the loan from the 4th Defendant and release the Plaintiff’s assets by the end of February 2015 and 30th April 2015 respectively.”

[19]     In the circumstances it cannot be said that the 3rd Defendant is liable for the balance of SCR 1 million.

[20]     I note that Counsel for the Plaintiff asked the Plaintiff in examination in chief if it was his intention to sell the company for two or three million rupees, to which the Plaintiff answered three million.

[21]     To my mind, on a perusal of the evidence, the Plaintiff was not selling the company to the Defendants, but was selling them his shares in the company and that is the purpose of PE2, the Share Transfer Agreement.

[22]     The Plaintiff’s witness Mr. Elizabeth deponed that the case was a fit one for the Court to consider lifting the corporate veil because the 3rd Defendant has undergone bankruptcy proceedings and he believes that this is the main reason that the 1st Defendant has not complied with his obligation. It was his evidence that the 1st Defendant is relying on the liquidator to inform the Plaintiff that the company has no assets in the event that the Plaintiff gets a judgment in his favour.

[23]     In the case of State Assurance Corporation of Seychelles v First International Company Ltd CS 409/1998 delivered 14th June 2006 lifting the corporate veil was explained as being a concept that “describes a legal decision where a shareholder of a corporation is held personally liable for the debts of the corporation despite the general principle that those persons are immune from suits in contract or tort, that otherwise would only hold the corporation liable”.

[24]     In the above case the Plaintiff was a statutory corporation carrying business of insurance in Seychelles and the Defendant was a company registered in Seychelles carrying on the business of insurance broker. One Paul Chow was the director and majority shareholder in the Defendant company along with his wife. The Plaintiff and Defendant had an agreement whereby the Defendant was acting as agent of policy holders and authorised to transact insurance business with the Plaintiff. In a nutshell judgment was entered against the Defendant which was not honoured resulting in the Plaintiff then Judgment Creditor asking the Court to order that Paul Chow was personally liable to pay the debt of the company.

[25]     The difference between the above case and the case at hand is that in the absence of proof that the 1st Defendant was a Director of the 3rd Defendant at the time he signed PE2, the Share Transfer Agreement, there was effectively no agreement between the Plaintiff and the 3rd Defendant.

[26]     In the absence of evidence that the 3rd Defendant was liable for the balance of SCR 1 million as well as the promise to release the mortgages on the Plaintiff’s properties, the Court cannot consider lifting the corporate veil.

[27]     On the basis of the above I find that none of the claims can be sustained and I accordingly dismiss the Plaint.

Signed, dated and delivered at Ile du Port on 5th September 2018

L. Pillay J
Judge of the Supreme Court