Sequestration: Ensuring Security in Respect of the Enforcement of Court Judgments under OHADA law
By Divine Afuba
LLM, London School of Economics
E: divineafuba@dayspringlaw.com
The applicable law relating to sequestrations otherwise known in French as “saisie conservatoire”, is the OHADA Uniform Act organizing simplified recovery procedures and measures of execution (hereinafter “the UA”).
For the purpose of this article, I will be using the term “seizure” interchangeably with the term sequestration as it is also used in the UA.
The UA, like OHADA law in general, is of continental Civil law origin. As a Common law jurist, I would like to begin this paper by briefly stating what I understand to be the common law/English law position on sequestration, at least for purposes of comparative law.
SEQUESTRATION IN ENGLISH LAW
Generally speaking, sequestration is a means of ensuring security in respect of the enforcement of a court judgment.
In international commercial litigation, one of the important issues has always been to understand how you can stop a defendant from removing his assets out of the court’s
jurisdiction, thereby making it impossible to satisfy the judgment. The answer is to obtain a court order freezing his assets. This has to be done ex parte, before serving the writ of summons (now called “claim form” in English Civil Procedure); otherwise the defendant will have time to defeat the order. In England, such orders were not possible until 1975. In that year, the Court of Appel allowed asset-freezing orders under section 45 of the Supreme Court of Judicature (Consolidation) Act 1925. This occurred in two cases, Nippon Yusen Kaisha v Karageorgis[1] and Mareva Campania Naviera SA v. International Bulkcarriers SA[2].
The orders were originally called “Mareva Injunctions”, after the name of the second of these two cases. Today, they are known as “freezing orders” in England, though they are still called Mareva Injunctions in Commonwealth countries[3].
Originally, the order could only be granted if the defendant was out of the country, but this rule was dropped by the courts. Today, by virtue of section 37(3) of the Supreme Court Act 1981, the order not only prohibits the removal of assets from the jurisdiction, but also interdicts dealing with them within the jurisdiction in any manner that prevents the creditor from satisfying the judgment. The freezing order operates in personam and requires the person against whom it is made not to deal with his assets so as to defeat judgment-creditors.
The freezing order procedure was explained by the great English judge, Lord Denning, in Third Chandris Shipping Corporation v Unimarine SA[4] in these words:
“It is just four years ago now since we introduced here the procedure known as Mareva injunctions. All other legal systems of the world have a similar procedure. It is called in the civil law saisie conservatoire …It enables a creditor in a proper case to stop his debtor from parting with his assets pending trial…
In this Siskina case [1979] AC 210 the House [of Lords] placed this restriction upon the procedure. It applies only in the case of an “interlocutory order.”In order to obtain a Mareva injunction there has to be in existence a substantive cause of action on which the plaintiff is suing or about to sue in the High Court in England or is enforcing or about to enforce by arbitration in England.
The guidelines
Much as I am in favour of the Mareva injunction, it must not be stretched too far lest it be endangered. In endeavouring to set out some guidelines, I have had recourse to the practice of many other countries which have been put before us. They have been most helpful. These are points which those who apply for it must bear in mind:
(i) The plaintiff should make full and frank disclosure of all matters in his knowledge which are material for the judge to know …
(ii) The plaintiff should give particulars of his claim against the defendant, stating the ground of his claim and the amount thereof, and fairly stating the points made
against it by the defendant.
(iii) The plaintiff should give some grounds for believing that the defendant has assets here…
(iv)The plaintiff should give some grounds for believing that there is a risk of the assets being removed before the judgment or award is satisfied …
(v) The plaintiff must of course give an undertaking in damages – in case he fails in his claim or the injunction turns out to be unjustified …
In setting out these guidelines, I hope we shall do nothing to reduce the efficacy of the present practice. In it speed is of the essence. Ex parte is of the essence. If there is delay, or if advance warning is given, the assets may well be removed before the injunction can bite…”
The same Lord Denning explained the position of third parties in respect of the Mareva injunction in the case of Z ltd v A-Z:[5]
“… As soon as the bank is given notice of the Mareva injunction, it must freeze the defendant’s bank account. It must not allow any drawings to be made on it, neither by
cheques drawn before the injunction not by those drawn after it. The reason is because, if it allowed any such drawings, it would be obstructing the course of justice – as prescribed by the court which granted the injunction – and it would be guilty of contempt of court. I have confined by observations to banks and bank accounts. But the same applies to any specific assets held by a bank for safe custody on behalf of the defendant. Be it jewelry, stamps or anything else, and to any other person who holds any other assets of the defendant. If the asset is covered by the terms of the Mareva injunction, that person must not hand it over to the defendant or do anything to enable him to dispose of it. He must hold it pending further order.”
As we shall see below, there are interesting parallels between the dicta of Lord Denning in these cases and the law on sequestration set out in the UA.
SEQUESTRATION IN THE UA
In OHADA law, sequestration is a mechanism that enables a creditor to obtain the provisional seizure of property belonging to its debtor, pending the outcome of legal proceedings. It is protective in nature as it prevents the debtor from misappropriating or damaging the assets or even moving such assets out of the jurisdiction of the court before an unfavourable decision is made against the said debtor.[6]
Article 54 of the UA enacts as follows:
“Any person whose claim appears in principle to be founded may, by petition, pray the competent court of the residence or place of abode of the debtor for an authorization to take preventive measures on all the tangible or intangible personal property of his debtor, without prior summons to pay, where he can show justifiable circumstances which are likely to jeopardize the collection.”
This article discloses the fact that sequestration can only be ordered if the following conditions are satisfied:
- The claim must appear to be founded in principle
- The applicant must prove to the court’s satisfaction that circumstances exist that are
such as to endanger the recovery of the debt[7] - The petition must be filed at the competent court of the place of residence or
place of abode of the debtor[8] - The assets that are targeted by the sequestration measure must be tangible or intangible
personal property[9] - Such assets must belong to the debtor.
Note that the fact that the debt must be certain is not a condition to be taken into account before effecting a sequestration: Ongolo-Entrepreneur-Prestataire de Services c/ Société Africaine pour l’Industrie et le Commerce au Cameroun (CCJA, arrêt n° 108/2014 du 04 novembre 2014, Code Blue page 641).
It has also been held on high authority that the judge has the jurisdiction to examine for itself whether or not the claim is founded in principle and whether circumstances exist that endanger the recovery of the debt: Entreprise de Métallurgie Ivoirienne dite EMI c/ Monin Jean-Paul (CCJA, arrêt n° 085/2014 du 22 mai 2014, Code Blue page 641).
It should be observed that prior court authorization must be obtained before assets can be sequestrated. However, as per article 55 of the UA, where the creditor has a writ of execution, such prior authorization is no longer necessary[10].
The decision ordering sequestration must – under pain of being declared void – specify the amount of the sums in guarantee of which sequestration is authorized and also the nature of the property targeted: article 59 of the UA. Cameroonian case law is clear on the fact that a failure to specify the amount of the sums in guarantee of which sequestration is authorized constitutes a nullity of public policy that results in the nullity of the sequestration: arrêt n° 121/Civ du 22 août 2007 de la CA de l’Ouest: El Hadj Fifen Soule c/ Mpondo Daniel, Code Blue page 650.
Once sequestration is ordered by the competent court, it must be executed within a period of three months from the date of the decision authorizing it. The court authorization ordering the sequestration will be null and void if this rule is not complied with: article 60 of the UA. Where sequestration is carried without a writ of execution as spelt out in article 33 of the UA, the creditor must within a period of one month following sequestration institute proceedings or complete the necessary formalities to obtain a writ of execution. Where this mandatory requirement is not complied with, the sequestration is null and void: article 61 UA.
Where the pursuing creditor fails to show compliance with the provisions of article 54, 55, 59 and 60 of the UA, the competent court may, at any time at the request of the debtor, order the release of the sequestration: article 62 of the UA. Only the debtor is competent to petition the court to challenge the sequestration procedure, to the exclusion of all others: TGI de Ouagadougou, jugement n° 30 du 04 février 204; Ouedraogo Idrissa c/ Ouedraogo Dominique, Code Blue page 653.
The petition for the release order is brought before the competent court that authorized the sequestration. Where sequestration was taken without prior authorization, the petition shall be brought before the court of the residence or place of abode of the debtor: article 63 of the UA.
SEQUESTRATION PROCEDURE
This procedure will vary depending upon whether the subject of the sequestration is on:
– tangible property;
– debts owed to the debtor by a third party (receivables); or
– transferrable securities or other partnership rights.
SEQUESTRATION OF TANGIBLE PROPERTY
Sequestration of tangible property is regulated by article 64 et seq of the UA. After reminding the debtor of his obligation to indicate any of his property that has been the subject of a previous seizure and to provide him with a report thereof, the bailiff prepares a seizure report (“procès-verbal de saisie”) containing the following information, under penalty of being declared void:
(1) A reference of the court authorization or the writ authorizing the seizure;
(2) The full names and residence of the distrainee and distrainor or, in the case of corporate entities, the legal form, name and registered office;
(3) Election of residence in case the creditor is not resident within the jurisdiction of the court where the act of seizure for security is done;
(4) A detailed description of the seized properties;
(5) Where the debtor is present, his statement concerning any previous seizure of the same properties;
(6) A statement in bold characters that the seized properties are inalienable (“indisponibles”), that it is in the custody of the debtor or third party agreed upon by the parties or, failing this, by an urgent court ruling, that it may neither by alienated or moved, under penalty of criminal sanctions, and that the debtor is required to disclose the present seizure to any creditor undertaking a new seizure on the same properties;
(7) A statement in bold characters concerning the right of the debtor to petition the competent court of his place of residence for the latter to uplift the seizure if the
conditions for a valid seizure are not met;
(8) A designation of the court before which shall be brought other disputes, notably those relating to the execution of the seizure;
(9) An indication, where applicable, of the names and capacity of the persons who partook in the seizure operations;
(10) A reproduction of the penal provisions attending the misappropriation of the objects seized, as well as those of articles 62 and 63.
Where the debtor is present during the seizure operations, the bailiff verbally reminds him of the contents of article 64(6) and (7) above. A copy of the report bearing the same signatures as the original shall be given to him immediately. The giving to the debtor of a copy of the report shall be equivalent to notification: article 65 UA.
Where the debtor is not present during the seizure operations, a copy of the seizure report is notified to him and he shall be given a period of 8 days to inform the bailiff about any previous seizure operations and to send the report thereof to the bailiff: article 65 UA.
Article 67 of the UA enacts that where the seizure is carried out on assets in the hands of third parties, the applicable procedure is that contained in articles 107 to 110 of the UA, and articles 112 to 114 of the UA. These articles concern the seizure for sale (“saisie-vente”) of tangible property[11].
Article 67 of the UA provides further that where the seizure is carried out on property without prior court authorization, the provisions of article 105 of the UA will apply. This article deals with the seizure for sale (“saisie-vente”) of tangible property and enacts that where the seizure concerns property held by a third party and in premises used as a dwelling by the third party, it shall be authorized by the court of the place of location of the property.
THE CONVERSION OF SEQUESTRATION INTO SEIZURE FOR SALE (“SAISIEVENTE”)
A creditor can convert a sequestration into a seizure for sale. For this to happen, the creditor must be in possession of a writ of execution evidencing the existence of his claim.
There is authority for the proposition that where the conversion of the sequestration into a seizure for sale is operated on the basis of a judgment of a lower court (“ordonnance”) that is the subject of an opposition, and where such judgment has been confirmed by another judgment of a higher court (“arrêt”) that does not bear the executory formular (“la formule exécutoire”) the conversion is null and void: TPI d’Abengourou, Côte d’Ivoire, ordonnance de référé du 21 septembre 2005, Fonds de Garanties des Coopératives café Cacao c/ Maître Gnaba Gnadjue Jerôme, Code Blue page 659.
According to article 69 of the UA, the conversion is done by notifying a conversion deed (“acte de conversion”) to the debtor. Such conversion deed must contain the following information, under pain of nullity:
(1) The full names and residences of the distrainee and distrainor, or, in the case of corporate bodies, their legal form, name and registered office
(2) Reference to the sequestration report (“process-verbal de saisie conservatoire”)
(3) A copy of the writ of execution, save where such a writ has already been entered in the report of the sequestration, in which case it shall simply be mentioned;
(4) A separate account of the sums payable in principal, costs and accrued interests, as well as an indication of the interest rate;
(5) A summons to pay the said sum of money within a period of eight days, failing which the property seized shall be sold.[12]
Article 69 of the UA enacts that the conversation of sequestration into seizure for sale may be entered into a deed notifying the writ of execution.
Furthermore, article 69 states that where the seizure is carried out on property in the hands of a third party, a copy of the conversion deed is disclosed to such third party.
Upon expiry of the 8 day period from the date of the conversion deed (“acte de conversion”) the bailiff proceeds to verify the property attached/seized, and prepares a report of missing or damaged property. In this report, the bailiff notifies the debtor that he has a period of one month to sell the property seized/attached by private sale, in compliance with the conditions prescribed in articles 115 to 119 of the UA: article 70 of the UA.
Where the debtor does not carry out the private sale within the prescribed period, the seized property shall be forcibly sold in accordance with the procedure laid down for seizure for sale (“saisie-vente”).
NB: Sequestration is a conservatory measure. It can only become a measure of execution if it is converted into a seizure for sale; otherwise it remains a purely conservatory measure: CCJA, arrêt n° 005/2005 du 27 janvier 2005, DEC c/ Limba SA
SEQUESTRATION OF DEBTS/RECEIVABLES (“SAISIE CONSERVATOIRE DES CREANCES”)
Article 77 of the UA is to the effect that debts can be sequestrated by way of deed from the bailiff (« acte d’huisier ») notified to the third party (called “garnishee”) in compliance with articles 54 and 55 of the UA.
This bailiff’s deed must contain the following, under penalty of being declared void:
(1) A statement of the full names and residences of the debtor and distraining creditor/garnishor (“créancier saisisant”), or, in the case of corporate bodies, their
legal form, name and registered office;
(2) Election of residence in the area of jurisdiction of the court where the seizure will be made, where the creditor does not reside there; any notification or offer may be made at such elected residence;
(3) An indication of the court authorization or the writ authorizing the seizure;
(4) A detailed account of the sums for which the seizure is carried out;
(5) A prohibition to a third party from disposing of the sums claimed, up to the amount he owes the debtor;
(6) A reproduction of the provisions of the second paragraph of articles 36 and 156 of the UA.
In the absence of any private arrangement (“accord amiable”) any interested party may request by petition that the sums seized be consigned in the hands of a depository
(“sequestre”): article 79 of the UA.
Within a period of 8 days, and under penalty of being declared void, the sequestration shall be disclosed to the debtor by deed of a bailiff. Under penalty of being declared void, article 79 of the UA informs that this deed shall contain the following:
(1) A copy of the court authorization or the writ of execution by virtue of which the seizure was carried out;
(2) A copy of the report of the seizure (“process-verbal de saisie”);
(3) A statement in bold characters of the debtor’s right, where the validity conditions of the seizure are not met, to petition the court of his place of residence to release the
seizure;
(4) The indication of the court before which other disputes shall be brought, especially those related to the execution of the seizure;
(5) A reproduction of the provisions of articles 62 and 63 of the UA.
The garnishee (“tiers saisi”) shall be required to furnish the bailiff with the information required under article 156 of the UA and to submit to him copies of all the relevant
documents[13]. This information is mentioned in the report (“process-verbal de saisie”): article 80 of the UA.
Article 81 of the UA enshrines the liability of the garnishee. It stipulates that the garnishee who without legitimate cause, fails to supply the information required shall expose himself to paying the sums which warranted the seizure, where the said seizure is converted into a seizure-award (“saisie-attribution”), subject to any action he may take against the debtor. He may also be ordered to pay damages in case of negligence or inaccurate or false declaration.
Note that where third party declarations are not challenged before the deed of conversation, such declarations shall be deemed to be accurate for the purposes of the seizure.
THE CONVERSION OF SEQUESTRATION OF DEBTS INTO SEIZURE-AWARD (“SAISIE-ATTRIBUTION”)
A creditor can convert a sequestration of debts into a seizure award of debts. For this to occur, article 82 of the UA indicates that such a creditor must be armed with a writ of execution certifying the existence of his claim. The creditor must serve the garnishee a deed of conversion (“acte de conversion”) which must contain the following, under pain of nullity:
(1) A statement of the full names and residences of the distrainee (“le saisi”) and distrainor (“le saissisant”), or, in the case of corporate bodies, their legal form, name
and registered office;
(2) A reference to the sequestration report (“process-verbal de saisie”);
(3) A copy of the writ of execution, save where such a writ has already been communicated during the notification of the report of the seizure, in which case it shall
simply be mentioned;
(4) A separate account of the sums payable in principal, costs and accrued interests, as well as an indication of the interest rate;
(5) A request for payment of the sums previously indicated, up to the amount which the third party acknowledged or has been declared to be owing.
The deed should inform the third party that within that limit, the request entails immediate award of the debt seized for the benefit of the creditor.
Article 83 of the UA ordains that a copy of the deed of conversion shall be served on the debtor. With effect from such notification, the debtor shall have a period of 15 days within which to challenge the deed of conversion before the court of his residence or of his place of abode. Only the debtor can challenge the conversion: CCJA arrêt n° 013/2010 du 18 février 2010, société Palmci SA c/ Société Ivoirienne de Pièces Automobiles Sarl, Code Blue page 669.
Where there is no challenge, the third party must make payment to the creditor or to his representative on the presentation of a registry certificate attesting that no challenge has been made (in French, “le certificat de non contestation”).
But payment may be made before the expiry of the period where the debtor has declared in writing that he is not challenging the deed of conversion.
SEQUESTRATION OF PARTNERSHIP RIGHTS AND TRANSFERRABLE SECURITIES
SEQUESTRATION OPERATIONS
Under the UA, partnership rights and other transferrable securities (shares, bonds) may be subject to forced execution. Sequestration occurs via notification of a deed that is delivered 8 days after an unproductive summons to pay (“commandement de payer”), to the issuing company or corporate body or representative charged with preserving or managing the securities: articles 85 as read with article 236 of the UA.
Under penalty of being void, the aforementioned deed shall contain the following, as per articles 85 and 237 of the UA:
(1) The full names and residences of the debtor and distraining creditor, or, in the case of corporate bodies, their legal form, name and registered office;
(2) Election of residence in the territorial jurisdiction of the court where the seizure will be made, where the creditor does not reside there; any notification or offer may be
made at such elected residence;
(3) An indication of the writ authorizing the seizure, or an authorization of the competent court to carry out the sequestration;
(4) A detailed account of the sums claimed in principal, costs and accrued interests, as well as an indication of the interest rate;
(5) An indication that the seizure shall render inalienable the pecuniary rights attached to the totality of shares and transferable securities to which the debtor is entitled;
(6) A summons to disclose within 8 days the existence of any pledges or seizures and to communicate to the distrainor a copy of the articles of association of the company.
Within a period of 8 days, the sequestration is notified by deed to the debtor. Under penalty of being declared void, the deed must contain the following (article 86 of the UA):
(1) A copy of the court authorization or document (“le titre”) authorizing the sequestration;
(2) A copy of the report of the sequestration;
(3) A statement in bold characters of the debtor’s right, where the conditions of validity of the seizure are not met, to petition the court of his place of residence for the release of the seizure;
(4) A designation of the court before which shall be brought the other disputes, notably those relating to the execution of the seizure;
(5) Election of residence in the territorial jurisdiction of the court of the place of execution of the sequestration will be made, where the creditor does not reside there; any
notification or offer may be made at such elected residence;
(6) A reproduction of articles 62 and 63 of the UA.
Note that as per article 239 of the UA, the act of sequestration renders inalienable (“indisponibles”) the pecuniary rights of the debtor, who may obtain a release by depositing a sufficient sum to pay off the creditor. This sum of money is specifically assigned to the benefit of the distraining creditor.
CONVERSION INTO SEIZURE FOR SALE (“SAISIE-VENTE”)
It is possible to convert the sequestration of partnership rights and transferrable securities into a seizure for sale of same. For this to occur, article 88 of the UA ordains that the creditor must possess a writ of execution showing the existence of his claim. The creditor must notify the debtor the deed of conversion into a seizure for sale (“l’acte de conversion en saisie-vente”), which must contain the following information, under penalty of being declared void:
(1) The full names and residences of the distrainee and the distrainor or, in the case of corporate bodies, their legal form, name and registered office
(2) The reference to the report of the sequestration
(3) A copy of the writ of execution, save where such writ has already been communicated during the notification of the report of the seizure, in which case it shall simply be
mentioned
(4) A separate account of the sums payable in principal, costs and accrued interest, as well as an indication of the interest rate;
(5) A summons to pay the same sum, failing which the property seized shall be sold;
(6) A statement in bold characters that the debtor has a period of one month to carry out the private sale of the securities seized, under the conditions provided for by articles
115 to 119 of the UA[14]
(7) A reproduction of articles 115 to 119 of the UA
A copy of the deed of conversion is served on the garnishee (“tiers saisi”): article 89 of the UA. The sale is conducted in conformity with articles 240 to 244 of the UA.[15]
For related articles, click here, here and here
[1] [1975], 1WLR 1093
[2] [1980] 1 All ELR 213 ; [1975] 2 Lloyd’s Rep 509
[3] Trevor C Hartley, « International commercial litigation : text, cases and materials on private international law”, Cambridge University Press (2009) page 403
[4] [1973] 3 WLR 122
[5] [1982] 2 WLR 288
[6] Martha Simo Tumde et al, « Execution of court judgments under the OHADA Uniform Act on simplified recovery procedures and measures of execution” Presses Universitaires d’Afrique (2013) page 21
[7] In the absence of such circumstances that imperil recovery, the authorization to effect the sequestration must be withdrawn: see the 30 May 2000 judgment of the Abidjan Court of Appeal in La Mutuelle Centrale d’Assurances c/ La Nationale d’Assurances (Code Blue, page 640)
[8] This is in keeping with the general rule of law in civil procedure that a suit is commenced at the place of residence of the defendant
[9] See also article 56 of the UA which states that sequestration may be carried out on all the tangible or intangible personal property belong to the debtor, and that sequestration renders property inalienable.
[10] Article 33 of the UA enumerates the various writs of execution : court decisions with an executory clause, decisions enforceable immediately, conciliation reports signed by the parties and the judge, notarial deeds bearing an executor clause …
[11] To summarize, the bailiff invites the third party to declare the property in his custody that belongs to the debtor. After such declaration, the bailiff prepares an inventory (“un inventaire”) that contains, among other things, the reference to the document authorizing the seizure, the date of seizure, the full names and residence of the distrainor, debtor and third party, a detailed description of the property seized, a designation of the court before challenges in respect of the seizure shall be brought, an indication of the names of persons present during the seizure. Where the third party is present during the seizure, a copy of the seizure report is handed over to him. Where the third party is not present during the seizure, a copy of the seizure report is handed over to him and he shall be given a period of 8 days to disclose to the bailiff the existence of any previous seizure on the same property and to forward to the bailiff a report thereof. The third party may refuse custody of the seized goods and may, at any time, request to be discharged of them. Where he has a possessory lien on the seized goods, he informs the bailiff thereof via any means in writing, save where he had made a declaration thereof at the time of seizure.
[12] In the absence of a summons to pay, the conversion is null and void: Ordonnance de Référé n° 1382 du 08 septembre 2003, TRHC Dakar, Sénégal, Idrissa Ndiaye c/ Yves Gérard, Code Blue page 659
[13] Article 156 of the UA provides that a garnishee shall be required to declare to the creditor/garnishor the extent of his obligation towards the debtor, as well as clauses which could affect such obligations and, where need be, any previous transfers of debts, assignments of debts or seizures. He shall communicate copies of all relevant
documents.
[14] To summarize, articles 115 to 199 of the UA deal with the voluntary private sale of assets by a debtor, who uses the proceeds of the sale to pay off the creditor(s). The debtor has a period of one month from the notification of the report of the sequestration to sell the sequestrated property himself. He informs the bailiff of the offers he has received and indicates the name and address of the eventual purchaser as well as the period within which the purchaser proposes to deposit the proposed purchase price. The bailiff then forwards this information to the distraining creditor and opposing creditors, who shall have a period of 15 days to decide whether to accept the private sale, refuse it or propose themselves as purchasers. The sale price is deposit into the hands of the bailiff or court registry, as decided by the distraining creditor. The transfer of the property and delivery of the goods is subject to the deposit of the price, failing which, the forced sale of the goods shall be carried out.
[15] To summarize, articles 240 to 244 of the UA provides for sale by auction. Where the debtor does not voluntarily sell the assets and use the proceeds to pay off debtors, then the forced sale of the said assets shall take place by way of auction, at the request of the creditor.