A rush to put a company in receivership has led to a $6 million award against CIBC – 30 years later.
A lawsuit and countersuit between Canadian Imperial Bank of Commerce and the defunct jeans makers Gypsy International was settled by the Court of Appeal on Friday, with the court saying the decision was important to financial lending agencies and businesses.
The battle dates back to 1988, four years after the promising business was disrupted by a minor fire and fell into the hands of receivers. The court, led by Chief Justice Sir Marston Gibson, was asked to settle whether CIBC’s quick enforcement of a loan by appointing a receiver over Gypsy’s assets without demanding payment was legal.
Gypsy was started in June 1981 by Royston Beepat and he and his brother Dennis served as directors, having invested $500 000 each. It had an overdraft limit of $300 000 from CIBC secured by a demand debenture charging all assets of the company and trade bills discount to the extent of $800 000. The company also had credit of $400 000 from the Barbados Development Bank.
In 1982 its jeans sales were beyond $250 000 and by the next year reached $2.7 million but a “minor” fire in March 1984 halted production. Beepat met with staff and CIBC to assure all that operations would resume almost immediately.
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