Offshore Case Digest: Issue No. 8

I SS U E N O. 8
/ BERMUDA
/ BRITISH VIRGIN ISLANDS
/ CAYMAN ISLANDS
B E R M U DA
BRITISH VIRGIN ISLANDS
C AY M A N I S L A N D S
DUBAI
H O N G KO N G
LO N D O N
M AU R I T I U S
SINGAPORE
co nye r s d i l l .co m
OFFSHORE CASE DIGEST
1
/ conyersdill.com
BERMUDA | BRITISH VIRGIN ISLANDS | CAYMAN ISLANDS
/ Editor
Bermuda
Christian Luthi
/ Assistant Editor
Bermuda
Stephanie Hanson
/ Contributors
Bermuda
Ben Adamson
Scott Pearman
British Virgin Islands
Tameka Davis
About Conyers Dill & Pearman
Founded in 1928, Conyers Dill & Pearman is an international law
firm advising on the laws of Bermuda, the British Virgin Islands,
the Cayman Islands and Mauritius. With a global network that
includes 140 lawyers spanning eight offices worldwide, Conyers
provides responsive, sophisticated, solution-driven legal advice to
clients seeking specialised expertise on corporate and commercial,
litigation, restructuring and insolvency, and trust and private client
matters. Conyers is affiliated with the Codan group of companies,
which provide a range of trust, corporate secretarial, accounting
and management services.
This update is not intended to be a substitute for legal advice or a legal opinion.
It deals in broad terms only and is intended to merely provide a brief overview
and give general information.
Cayman Islands
Paul Smith
Erik Bodden
Hong Kong
Norman Hau
conyersdill.com /
2
ABOUT
THE DIGEST
The Offshore Case Digest offers readers a high
level summary of the major commercial cases
decided in Bermuda, the British Virgin Islands
and the Cayman Islands between July 2014
and October 2014. Our goal is to provide a
useful reference tool for clients and
practitioners who are interested in the
development of case law in each jurisdiction.
JURISDICTIONPAGE
Bermuda5
British Virgin Islands
11
Cayman Islands
14
We would welcome any feedback and suggestions from readers on
the content. If you would like to obtain further information on any
of the cases feel free to contact any of the Conyers Dill & Pearman
litigation team.
3
/ conyersdill.com
BERMUDA
BERMUDA
BERMUDA
SECTION 103 OF THE COMPANIES ACT, 1981 – MINORITY SHAREHOLDER – DEFINITION OF HOLDER AND PURCHASER
the remaining minority holders, may compulsorily purchase the latter’s
shares, subject to entitling them all to the same terms. On V&M’s case,
95% majority holders responsible for initiating such a process may
have recourse to the mechanism for which it provides, whether or not
thereafter they, the 95% majority holders, retain their holdings. On
MFP’s case, V&M, having divested themselves of their 95% majority
holdings following service of the notice on which they rely, had no
locus standi to resort to Section 103.
(1) MFP-2000, LP -v- (1) Viking Capital Limited (2) Misa Investments
Limited [2014] CA (Bda) 1 Civ (22 July 2014)
The issue turned on the respective meanings of, and relationship
between, the words ‘holders’ and ‘purchasers’ in Section 103(1).
On 29 September 2011 Viking Capital Ltd & Misa Investment Ltd
(“V&M”), 95% majority holders of the relevant ordinary shares in Viking
River Cruises Ltd. (“VRC”), gave a Section 103(1) notice to MFP 2000 to
purchase its 2.4% minority holdings of ordinary shares in VRC.
Following the activation by that notice of the appraisal process, V&M
transferred all of their 95% majority holdings to an associated company, Viking Cruises Ltd (“VC”). In the resultant re-structuring of V&M and
its associated companies, VC emerged as the holders of virtually all of
VRC. In short, the 95% majority shareholders of VRC transferred all
their shares in it to themselves under another corporate name.
The Judge at first instance ruled that, notwithstanding the transfer by
V&M to VC of their 95% majority holdings in VRC during the appraisal
period, V&M, as ‘purchasers’ within the meaning of that word in
Section 103, remained entitled to acquire MFP’s shares at a price to be
fixed by the Court. The conclusion of the first instance judgment was
that: “... Section 103 provides a mechanism whereby the holders of not
less than 95% of the shares in the company can purchase the shares of
the minority. That means the holders of not less than 95% of the shares
at the date when a Section 103 notice is given. The majority need not
retain their shares until the minority shares have been acquired or the
notice cancelled”.
Court of Appeal
July
Section 103(1) of the Companies Act, 1981 identifies the start of a
mechanism described in the remainder of the section by which holders
of a 95% majority of shares or class of shares, on service of a notice on
The Court of Appeal agreed and held that the word ‘purchasers’
cannot sensibly refer to persons or bodies who were not 95% majority
conyersdill.com /
5
BERMUDA
shareholders responsible for activation of the Section 103 processes in
question. In summary, 95% majority holders who give notice under
Section 103 may proceed to purchase remaining minority holdings
subject to and by means of appraisal if invoked, even if they or some of
their number, have in the meantime divested themselves voluntarily or
involuntarily of all or part of their holdings.
In the view of the Court of Appeal, the structure and wording of Section
103 obliges and entitles 95% majority holders who have served a Section
103(1) notice to acquire the remaining minority holdings, whether or not
they remain 95% majority holders at the time of any appraisal invoked
by the minority holders. Section 103(1)’s opening words, “The holders ...
hereinafter in this Section referred to as the ‘purchasers’, simply presage
the mechanism set out in the remainder of the provision by which they,
the ‘holders’ responsible for giving the notice, become and remain
entitled, until completion of the appraisal process and subject to
compliance with it, to acquire the minority shares.
The above conclusion would be sufficient in itself to resolve the appeal
in favour of V&M. However, the Court of Appeal added that it agreed
with the First Instance Judge’s observations that Section 103 has as its
dominant purpose the facilitation of ready corporate restructuring
while also providing fair treatment to minority holders.
Accordingly, the Court dismissed MFP’s appeal and held that V&M
remained entitled under their Section 103(1) notice to acquire MFP’s
shares at a price yet to be fixed.
Supreme Court
July
INTERNATIONAL COOPERATION (TAX INFORMATION EXCHANGE
AGREEMENTS) ACT, 2005 (THE “2005 ACT”) – COSTS
Ministry of Finance -v- O [2014] SC (Bda) 60 Civ (17 July 2014)
Section 6 of the 2005 Act imposes a statutory duty upon a person
served with a production order to provide the information sought,
provided that, it is within his possession or control. The 2005 Act is
silent as to who should bear the costs of compliance.
In an earlier ruling of the Court, the Defendant, “O”, was ordered to
produce copies of various documents to the Plaintiff. The question of
who, as between the Plaintiff and the Defendant, should bear the costs
6
/ conyersdill.com
of complying with the order was adjourned to this hearing.
The Judge held that competing policy considerations urged upon him
by the parties, while persuasive, were evenly balanced and therefore
cancelled each other out. Despite this, it was considered desirable that
there should be a common approach to the costs of production orders,
whether made in criminal or regulatory proceedings. In the absence of
a settled practice in Bermuda, the Judge proposed to adopt the
practice as to the costs of criminal production orders made in England
and Wales. Thus, it was held in the case of production orders made
under TIEAs and served on third parties in the financial services
industry, the third party Respondent should generally bear the costs of
compliance with the order. It followed that the Defendant was ordered
to bear its costs of complying with the earlier production order.
August
COMPANY LAW - DECLARATORY RELIEF – INTERIM INJUNCTION
– REMOVAL OF DIRECTORS – SERIOUS ISSUE TO BE TRIED –
BALANCE OF CONVENIENCE
Oung Shih Hua James -v- Paladin Limited [2014] SC (Bda) 62 Com (14
August 2014)
The Plaintiff in this case is seeking a declaration that a lawfully
convened special general meeting (“SGM”) of the Defendant company
was held on 1 August 2014 and that various resolutions were validly
passed thereat; most significantly, resolutions that removed or
purportedly removed certain directors and appointed new directors.
For the purposes of this hearing, the Plaintiff sought interim injunctive
relief (to restrain the Defendant Board members the Plaintiff contends
were validly removed, from purporting to act on behalf of the Company).
In applying the test for an injunction, the Judge first considered
whether there was a serious issue to be tried. It was explained to the
Court by the plaintiff that before any business could be conducted at
the SGM, the Chairman had raised concerns about the propriety of
certain nominees to the Board and purported to adjourn the meeting,
in his discretion, without seeking the direction of the meeting itself.
The meeting continued with an acting Chairman being ‘appointed’ and
the proposed resolutions were duly passed. In this respect, the Judge
noted that according to the byelaws, there was no open-ended
unfettered discretion in the Chairman of a general meeting to post-
BERMUDA
pone or adjourn a meeting and the power to adjourn can only be
exercised at the direction of the shareholders. The Judge also noted
this proposition to be consistent with general notions of English-based
company law supported in argument by reference to National Dwellings Society -v- Sykes [1894] 3 Ch. 159. The Judge therefore held there
was a serious issue to be tried, namely whether the SGM was in fact
validly continued, and whether those persons who are purporting to
still be Board members are not.
The Judge went on to hold that the balance of convenience was in
favour of granting injunctive relief. An overwhelming factor was that
the ‘rival Board’, had accepted, in a notification through the Hong Kong
Stock Exchange, that there should effectively be a standstill until
matters can be clarified. The Judge therefore held, the status quo,
which is an uncertain Board composition, should be preserved until a
trial can take place as soon as possible.
The Judge noted that it was clearly in the interests of justice generally
and the reputation of Bermuda and the Hong Kong Stock Exchange
for a dispute about who controls a company to be resolved at the earliest possible opportunity. The Judge granted the interim injunction
sought and gave directions for an expedited trial.
PLACING AGREEMENT – CHANGE OF CONTROL – URGENT
INJUNCTION TO RESTRAIN SPECIAL GENERAL MEETING –
APPROPRIATE FORUM (BVI)
(1) Gold Seal Holding Limited (2) Five Star Investments Limited (3)
Oung Shih Hua (also known as James Oung) (4) Huang Weizong Martin
(5) Kwok Wai chi -v- (1) Paladin Limited (2) Chen Te Kuang (also known
as Mike Chen) (3) Law Fong [2014] SC (Bda) 66 Civ (27 August 2014)
Paladin Limited, the first Defendant, is a Bermudian company listed on
the Hong Kong Stock Exchange which is ultimately owned by various
members of the Oung family. The present proceedings were commenced by the controllers of the first Defendant to challenge the
implementation and validity of a 29 April 2014 Placing Agreement and
resolution transferring control over Paladin to the second and third
Defendants, and purportedly approved by Paladin’s Board of Directors on
19 May 2014.
On 21 May 2014, Hellman J granted an ex parte Injunction restraining
the implementation by Paladin of the said Placing Agreement.
Following an inter partes hearing on 29 May 2014, he discharged that
injunction on the grounds that, inter alia, there was no serious issue to
be tried and that damages would have been an adequate remedy. On
13 June 2014, the Plaintiffs filed a Statement of Claim in which an
additional complaint emerged. The Board of Paladin were alleged to
have failed to convene a special general meeting (“SGM”) requisitioned
by the first and second Plaintiffs under Section 74 of the Companies
Act, 1981, who accordingly themselves convened the SGM for 16 June
2014. The Defence filed on 26 June 2014 countered that the Board
itself had duly convened a SGM and that the 16 June 2014 SGM had not
been validly convened. The purpose of the SGM was in practical terms
for the controllers of Paladin to reassert control of the composition of
the Board.
In this application, the second Defendant sought an urgent injunction
restraining Paladin from holding a SGM due to be held on the 1 August
2014 and from putting to its shareholders at any meeting any resolutions, or otherwise passing or putting into effect any resolutions, which
have the effect, directly or indirectly, of altering the Board composition
of the Respondent. The Judge refused this application and made the
following useful observations:
In the present case, the only substantive causes of action explicitly
supported by evidence lay against the second Defendant, Five Star
Investment Limited (“Five Star”), which is resident in the British Virgin
Islands, and related to matters (the status of its shareholding and the
proposed exercise of its corporate power through voting its shares in
Paladin at the SGM) that are primarily governed by BVI law. It was not
contended by the second Defendant that the BVI Court was not
competent to grant injunctive relief in support of any arguable claim
that the exercise of Five Star’s power to vote its shares in Paladin
ought properly to be restrained pending a determination of the
dispute as to who was entitled to control Five Star.
Accordingly, BVI appeared to be both the most appropriate forum for
the substantive action concerning the control of a BVI company and
the most suitable venue for seeking the specific type of interim relief
sought instead from this Court.
September
REVIEW OF REGISTRAR’S TAXATION – COSTS – ORDER 62
Allison Thomas -v- Fort Knox Bermuda Limited [2014] SC (Bda) 70
Com (11 September 2014)
The Appellant Plantiff appealed against the decision of the Registrar that
conyersdill.com /
7
BERMUDA
it was open to the Defendant to tax its costs awarded by the Court in an
earlier judgment. The Costs Order had provided as follows: “The Plaintiff
to pay the Defendant’s costs, taxed if not agreed. Enforcement stayed
pending further hearing to be listed on the first available date in October
2011 or following determination of the Plaintiff’s Section 111 petition, if
earlier”.
The Appellant’s Counsel submitted that the Costs Order had not stayed
taxation of costs and the Court had no power, in light of Order 62 Rule
29(1), to postpone the commencement of taxation beyond the standard
six months. Counsel for the Respondent submitted that substantial
justice favoured the receiving party, as the paying party had escaped
paying costs since the date of the judgment, without any liability for
interest. The Court’s powers on a review were generous, and if the
Registrar was entitled to extend time for taxation, so was a Judge on
review from her decision.
The Judge held, there was no basis to support the proposition that, in
staying enforcement, it was intended to stay taxation as opposed to
merely enforcement of the obligation to pay pursuant to an order of
taxation. The scheme of the Rules suggests that a trial Judge does not
have that power, that power is conferred on the Registrar by Order 62
Rule 21. However, the Judge did not construe the Rules as excluding the
Court’s inherent jurisdiction to grant a stay of taxation proceedings altogether, for instance, pending an application for leave to appeal or in
other peculiar circumstances where such a stay may be just and
convenient. However, a Costs Order which merely stays enforcement
cannot properly be construed as, by implication, overriding the scheme
of Order 62 and staying the obligation to commence taxation proceedings within the time fixed by Rule 29.
The Judge then considered what consequences should flow from finding
that the Costs Order, properly construed, did not postpone the Respondent’s obligation to commence taxation proceedings. In this respect, it
was noted that non-compliance with the Rules, does not make any step
taken in breach a nullity. The discretion to extend time is unfettered, and
on an appeal from the exercise of this discretion, a Judge can exercise his
own discretion anew: Order 62 Rule 35(4); Supreme Court Practice 1999,
paragraph 62/21/1. The scheme of Order 62 Rule 29, moreover, provides a
paying party who is aggrieved by the receiving party’s delay in proceeding with taxation with a specific remedy: commencing taxation themselves. As such, it was held, that where a paying party has sought a stay
of enforcement of a Costs Order and does not advise the receiving party
that he will complain of delay if the receiving party does not proceed with
8
/ conyersdill.com
taxation within a prescribed time period, justice clearly requires that an
extension of time should be granted.
STATUTORY DEMAND – SECTION 62 OF THE COMPANIES ACT, 1981
– EFFECTIVE SERVICE – REGISTERED OFFICE
Abu Dhabi Commercial Bank PJSC -v- Algosaibi Trading Services
Limited [2014] SC (Bda) 71 Com (12 September 2014)
The Petitioner was a creditor of the Respondent Company which had
served a Statutory Demand requiring the Respondent to pay the
judgment sum. The Petitioner had appeared before the Registrar and
satisfied the Registrar that requirements for service and advertisement
had been met. The only question that has been problematic in that
regard is the fact that former service providers at the Company’s
registered office, signified when served that they have resigned and the
address was no longer the registered office. The Court therefore
considered the requirements for service in circumstances where a
registered office is no longer an operative one.
The facts were that the Petitioner, having carried out a search at the
Registrar of Companies’ office, was clear the only registered office on
record is in fact the address at which the Statutory Demand and
Petition were served. The registered office rules contained in Section 62
of the Companies Act, 1981 (the “Act”) provide in Section 62(3) that the
company may change the situation of its registered office by giving
notice in the prescribed form to the Registrar and such change takes
effect upon the notice being registered by the Registrar.
The Judge held, he was satisfied that having regard to the provisions of
Section 62(3) of the Act, service on the last registered office of a
Bermuda company is good service.
SECTION 99 OF THE COMPANIES ACT, 1981 – NOTE CREDITORS –
CONTINGENT CREDITORS – DEFINITION OF CREDITOR
In The Matter of Titan Petrochemicals Group Limited (Provisional
Liquidators Appointed) [2014] SC (Bda) 74 Com (23 September 2014)
Applications for directions in relation to convening meetings at which
schemes of arrangements will be proposed to a company’s creditors or
shareholders are typically an uneventful ex parte affair. At the hearing of
the present application by the Company under Section 99 of the
Companies Act, 1981 (the “Act”) for leave to convene meetings of
creditors in Hong Kong to consider and potentially approve a scheme of
BERMUDA
arrangement, counsel for the Company and the Joint Personal Liquidattors (“JPLs”) both addressed the Court, inter alia, on the apparently
novel Bermudian law point of the ability of Note-Holders to vote as
contingent creditors at their class meeting. It was common ground that
this Court should follow persuasive judicial authority and practice from
a variety of common law jurisdictions and permit voting on this basis.
However, a problem arose because the Court had previously decided
that Note-Holders who did not actually hold notes did not qualify as
contingent creditors for the purposes of presenting a winding up
petition: Re Bio-Treat Technology Limited [2009] SC (Bda) 26 Civ (28
May 2009); [2009] Bda LR 29 (Bell J). Counsel was accordingly
compelled to distinguish the present case from Re Bio-Treat Technology
Ltd and/or to demonstrate why it ought not to be followed.
“(1) Where a compromise or arrangement is proposed between a
company and its creditors or any class of them or between a company
and its members or any class of them, the Court may, on the application
of the company or of any creditor or member of the company, or, in the
case of a company being wound up, of the liquidator, order a meeting of
the creditors or class of creditors, or of the members of the company or
class of members, as the case may be, to be summoned in such manner
as the Court directs.”
The Judge noted, the Court has in the past accepted the principle that
underlying owners of notes ought to be entitled to vote at a scheme
meeting, notwithstanding the fact that legal title is vested in a single
global Note-Holder. This acceptance was based on a practical desire to
make legal voting rights reflective of economic reality, in a context
where the unified legal title represented by a Global Note appeared to
be based on administrative and commercial convenience rather than
legal substance. It was not based on any considered and rigorous legal
analysis as to who qualifies as a creditor for the purposes of Section 99
of the Act. This intellectually light approach was noted as having been
informed by an appreciation that Section 99 is designed to facilitate
commercial bargains which attract the support of majorities in value. If
such support is forthcoming and no sustainable challenges to the
fairness of the meeting procedures are advanced at the sanction
hearing then the Scheme proceeds. If the Scheme does not attract the
requisite support and/or overcome objections advanced at the sanction
stage then the Scheme fails. Where a majority in number representing
75% in value of creditors of an insolvent company agree the underlying
beneficial holders of notes should be entitled to vote and other
candidates for voting rights waive those rights, the weight of such
commercial consensus provides no encouragement for the sanctioning
Court to explore theoretical legal impediments to approving the
proposed Scheme.
This Section falls within Part VII of the Act and the term ‘creditor’ is not
defined, either for the purposes of Part VII or the Act as a whole. The
crucial legal question placed before the Court was whether or not
Note-Holders qualified as ‘creditors’ for the purposes of Section 99
because they were contingent creditors of the Company.
The Judge was keen to point out that nothing in the present Judgment
should be read in any way as doubting the soundness of the factually
and legally distinguishable case of Re Bio-Treat Technology Limited
[2009] Bda LR 29, particularly as it relates to the standing of contingent creditors to present winding up petitions.
The Judge found it easy to conclude that Bell J’s decision should not be
followed in the present case and the Note-Creditors were entitled to vote
on the proposed Scheme as contingent creditors and provided three
main reasons. Firstly, since judgment was handed down in that case, a
new judicial consensus has emerged in several common law jurisdictions
with which we have strong commercial and legal ties, the underlying
beneficial interest owners in a Global Note have sufficient standing to
vote as a creditor at a Scheme meeting. Secondly, the crucial facts of the
earlier decision as regards to the legal relationship between the underlying beneficial owners and the Scheme company were materially different.
And, thirdly, Bell J’s narrow definition of who qualified as a contingent
creditor arose in the analogous but different context of determining who
had standing to petition to wind up a company.
October
Section 99 of the Act provides in salient part as follows:
STATUTORY DEMAND – SECTION 161 OF THE COMPANIES ACT 1981
– ADJOURNMENT OF PETITION
In The Matter of Agrenco Limited [2014] SC (Bda) 80 Com (10 October
2014)
In this matter the Petitioner was a creditor who had presented a
Statutory Demand under Section 162 of the Companies Act, 1981.
Section 162 provides, where a statutory demand is served and the
company has not paid the debt within three weeks, the company is
deemed to be insolvent. The Company appeared in opposition to the
Petition, not contending the debt is disputed, but seeking the adjourn-
conyersdill.com /
9
BERMUDA
ment of the Petition for one week. The Company sought the adjournment to enable it to supplement an Affidavit filed which expressed the
very indefinite hope that some form of restructuring of the operating
companies, which are in bankruptcy in Brazil, may yield monies which
can be distributed upwards to Agrenco Limited and to its creditors on
terms which would make a winding up unnecessary.
The Judge held, the reality is that an unpaid creditor has an absolute
right to a winding up order. In this circumstance it was far from clear to
the Judge that the winding up of the holding company will have an
adverse position on the operating companies. In the event there were
to be some dramatic development which made a winding up order
inconsistent with the interests of creditors, the relief which could be
obtained by the Company in those circumstances, no doubt with the
support of the petitioning creditor, would be to apply to stay the
winding up proceedings. As such, in light of the fact there was no
substantive opposition to the Petition, the Judge held, the correct
Order was to make the winding up order sought and grant the related
relief of appointing the Official Receiver as Provisional Liquidator.
TRUSTS – SPECIFIC PERFORMANCE – LIEN OVER TRUST ASSETS
– STATUS QUO – CONTROL OF BOOKS AND RECORDS - INDEMNITY
Appleby Services (Bermuda) Ltd. (as Trustee of the Bermuda Longtail
Trust) -v- (1) Edward Karl Furtak (2) Jennie Louise Furtak (3) Colleen
Nicole Furtak (4) Samantha Laureen Furtak (a minor) (11 October 2014)
This matter has a long procedural history, however, this summons,
issued by the Plaintiff Trustee sought specific performance of the first
Defendant by way of an instruction to a Costa Rican law firm to release
and deliver the legal books of Fairway Hasting (a Costa Rican corporation and asset of the Bermuda LongTail Trust) to the Plaintiff’s Costa
Rican attorneys. At this juncture, all the Trustee was seeking to do was
gain control of the books and records of the Costa Rican company for
conservatory purposes.
It was uncontroversial that the Plaintiff Trustee was entitled to exercise a
lien over Trust assets in respect of future liabilities. However, the first
Defendant relied on various dicta to support its position that the lien
attached only to assets in the Trustee’s control. The clearest authority
cited was Wester -v- Borland [2007] EWHC 2484 (Ch), where Norris J
stated at paragraph 10: “Nor is it controversial that the trustee has a right
of lien over trust funds in his hands in support of that indemnity”.
However, the Judge held, this argument unsustainable because, read in
10
/ conyersdill.com
the light of other authorities, all that Norris J appears to have meant was
the lien attaches to trust funds under the trustee’s control prior to a
transfer.
It was further argued by the first Defendant that there was a difference
between the existence of the lien and a trustee being able to transfer
trust assets into its name. The Judge held, this argument also lacked
substance on the facts of this case where (a) it seemed clear the Trust
(as opposed to the Trustee) was listed as the Company’s shareholder
in the Company’s books and (b) the conflict between the Trustee and
first Defendant made it obvious that preventing the Trustee from
gaining effective control over the assets would amount to refusing to
recognise altogether the existence of the lien in relation to those
assets.
In addition, the Judge gave consideration to a decision arising from an
ex parte Order sought by the Plaintiff in the Isle of Man High Court
(seeking to restrain the contending new Trustee from dealing with the
trust assets). First Deemster and Clerk of the Rolls David Doyle granted
this relief and held: “30 I am persuaded that this Court should assist the
Claimant and the Court in Bermuda and should grant the interlocutory
interim relief requested. Any issue as to whether the Claimant has been
validly removed as a trustee of the trust which is governed by the law
of Bermuda should be dealt with in Bermuda by the courts there. It is
appropriate for the status quo in respect of the assets of the trust to be
preserved pending the determination of the disputed issues in the
proceedings in Bermuda”.
The Judge held, the status quo was both as a matter of Bermudian law
as determined by the Bermuda Court (which law governs the Trust)
and Manx law (which governs the contending new Trustee) the
Plaintiff had sole claim to the books and records of Fairway Hasting.
The Judge granted the Order sought by the Plaintiff Trustee and
ordered the Plaintiff’s costs of the application to be taxed, if not
agreed, on the indemnity basis.
BRITISH VIRGIN ISLANDS
BRITISH VIRGIN ISLANDS
BRITISH VIRGIN ISLANDS
July
Court of Appeal
AMENDMENT TO COMPANY’S ARTICLES OF ASSOCIATION BY
SHAREHOLDERS’ RESOLUTION – COMPULSORY REDEMPTION OF
SHARES PURSUANT TO SHAREHOLDERS’ RESOLUTION – WHETHER RESOLUTION IN INTERESTS OF COMPANY – APPLICATIONS TO
ADDUCE FRESH EVIDENCE
Staray Capital Limited and Marlon Ray Chen -v- Cha, Yang BVIHCMAP
2013/0009 (July 2014)
This was an appeal by Staray Capital Limited (“Staray”) and Marlon
Ray Chen against the learned Commercial Judge’s decision that a
redemption notice issued pursuant to amended articles, to redeem
Mr Cha’s shares was invalid. Mr Cha cross appealed. He challenged
the findings that (i) a shareholders resolution to amend the articles of
association of Staray was in the interest of the company and that (ii)
he was not entitled to relief under Section 184I of the BVI Business
Companies Act (the “Act”) because he had not been unfairly
prejudiced.
The Court of Appeal dismissed both the appeal and counter appeal
and held, inter alia, that even if an amendment to a company’s articles
of association operates to the disadvantage of a minority shareholder,
this did not automatically mean the resolution which amended the
articles was passed in bad faith particularly where, as here, the
amendment applied equally to all the shareholders of Staray.
The Court also held that since the redemption notice issued pursuant
to the relevant article was an invalid notice and of no effect, Mr Cha
would not have suffered any prejudice and as such, a Court would not
exercise its discretion under Section 184I(2) of the Act to grant any of
the reliefs outlined in that subsection. The Court of Appeal observed,
the role of the Section 184I jurisdiction was to protect shareholders
against the breach of the terms on which they agreed the affairs of the
company should be conducted and against inequity resulting from the
exercise of strict legal power of those conducting the affairs of the
Company.
conyersdill.com /
11
BRITISH VIRGIN ISLANDS
September
INTERLOCUTORY APPEAL – FAILURE TO COMPLY WITH CASE
MANAGEMENT ORDER – RELIEF FROM SANCTIONS – RULE 26.8 OF
THE EASTERN CARIBBEAN SUPREME COURT CIVIL PROCEDURE
RULES 2000 – BALD ASSERTIONS MADE IN AFFIDAVIT IN SUPPORT
OF APPLICATION FOR RELIEF FROM SANCTIONS – WHETHER
ADEQUATE FOR PURPOSE OF DETERMINING WHETHER CRITERIA
SATISFIED FOR GRANT OF RELIEF – WHETHER LEARNED JUDGE
ERRED IN GRANTING RESPONDENT RELIEF FROM SANCTIONS
Prudence Robinson -v- Sagicor General Insurance Inc (Formerly
Barbados Fire and Commercial Insurance Company) SLUHCVAP
2013/0009 (September 2014)
This appeal is against a decision by the Judge below to grant relief
from sanctions to Sagicor General Insurance Inc (“Sagicor”). The Court
of Appeal allowed the appeal. Setting aside the Judge’s order granting
relief from sanctions, the Court held, the learned Judge did not pay
proper regard to the inadequacy of the affidavit evidence in satisfying
himself that there was a good explanation for the delay in filing the
witness summary. Having made the finding that Sagicor had relied on
bald assertions to support its application for relief from sanctions, the
Judge erred in granting the application. The Court of Appeal also held,
the Judge erred in granting the application for relief from sanctions
when a corresponding application for extension of time to file the
witness summary had not been made. Sagicor remained in breach of
the case management order without being granted an extension of
time. In the circumstances, the relief granted by the learned Judge
lacked efficacy.
COMMERCIAL APPEAL – TRUST FUND – ENTITLEMENTS OF
BENEFICIARIES – CONSTRUCTION OF PROVISIONS OF TRUST
DEED – WHETHER TRUSTEE HAD POWER TO EFFECT VARIATION
OF TRUST DEED IN ACCORDANCE WITH WISHES OF SETTLOR
– FIRST APPELLANT REMOVED FROM LIST OF BENEFICIARIES AND
ENTITLEMENTS OF REMAINING BENEFICIARIES ALTERED BY
SETTLOR – WHETHER ‘WORDS OF ENTITLEMENT’ IN ANNEXURE
OF TRUST DEED BY WHICH APPELLANTS WERE INITIALLY MADE
BENEFICIARIES CONVEYED IMMEDIATE, ABSOLUTE AND INDEFEASIBLE INTEREST IN TRUST ASSETS IN FAVOUR OF APPELLANTS
– WHETHER ANY POWER GRANTED IN DEED TO TRUSTEE TO
CHANGE BENEFICIARIES AND/OR PERCENTAGE ENTITLEMENTS
RENDERED OTIOSE
12
/ conyersdill.com
Yang Hsueh Chi Serena et al -v- Equity Trustee Limited et al BVIHCAMP
2013/0012 (September 2014)
This appeal related purely to a matter of the interpretation of certain
provisions of an inter vivos settlement. The first Defendant was the
ex-wife and former beneficiary of a trust established by her then
husband, the second to sixth Defendants his children. The first
Claimant was the trustee of the trust. The claim turned almost entirely
on the constructions of the words ‘words of entitlement’ in the trust
deed. The Defendants sought to argue this meant that in the case of
the first Defendant she could not be removed and in the case of the
remaining Defendants their respective percentages could not be
changed.
The Court dismissed the appeal and confirmed the decision of the
Commercial Judge and held, the ‘words of entitlement’ fell to be
construed by ascertaining what a reasonable person with all the
relevant background knowledge at the time of execution of the trust
deed, and construing the words in their natural and ordinary meaning
within the overall context of the scheme of the trust, would conclude
was the intention of the parties.
The Court of Appeal also found that where specific words are shown
by evidence to have been inserted into what is otherwise a standard
precedent or document, at the request or behest of one or more of the
parties, then a court ought, as a means of determining the intention of
the parties, to give some weight to the chosen words or provisions of
the parties, especially where other ‘standard’ provisions may conflict
with or be inconsistent with the chosen words or provisions, and where
appropriate, to accord precedence to those words.
October
INTERLOCUTORY APPLICATION – STAY OF EXECUTION – EXERCISE
OF COURT’S DISCRETION TO GRANT STAY OF PROCEEDINGS
– WHETHER STAY OF JUDGE’S ORDER IN THE LOWER COURT
SHOULD BE GRANTED PENDING HEARING AND DETERMINATION
OF APPEAL OF THAT JUDGE’S DECISION – WHETHER FAILURE TO
GRANT STAY OF LIQUIDATION PROCEEDINGS WOULD RENDER
APPEAL OF JUDGE’S DECISION NUGATORY – RULE 62.19 OF THE
CIVIL PROCEDURE RULES 2000 – ARBITRATION ORDINANCE – INSOLVENCY ACT
BRITISH VIRGIN ISLANDS
C-Mobile Service Limited -v- Huawei Technologies Co Limited BVIHCMAO 2014/0017 (October 2014)
Matthew Harris -v- Lindsay Mason GDAHCVAP 2014/0028 (October
2014)
This case concerns an appeal against the refusal by the learned Judge
below to grant a stay of liquidation proceedings commenced by
Huawei Technologies Co Limited (“Huawei”) in relation to the affairs of
C-Mobile Services Limited (“C-Mobile”). Granting a stay of the Judgment of the Judge in the Court below the Court of Appeal held, there
was no automatic right to a stay of proceedings pending appeal and a
successful Litigant should not normally be denied of the fruits of its
success pending appeal except in exceptional circumstances. The
Court applied the five principles identified by the Court in NB -v- London Borough of Haringey [2011] EWHC 3544 (Fam) namely that (i) the
Court should take into account all the circumstances of the case (ii)
stay is the exception rather than the general rule (iii) the party seeking
a stay must provide cogent evidence the appeal will be stifled or
rendered nugatory unless a stay is granted (iv) in exercising its
discretion, the Court applies what is in effect a balance of harm test in
which the likely prejudice to the successful party must be carefully
considered and (v) the Court should also take into account the
prospect of the appeal succeeding, but only where strong grounds of
appeal or a strong likelihood the appeal will succeed is shown.
This is an appeal by Matthew Harris against the refusal by the learned
master to set aside judgment in default entered against him on the
basis that the Judgment was irregular because it included judgment
for a specified sum of money and for an unspecified sum of money.
The Court of Appeal dismissed the appeal and held that although CPR
2000 does not expressly deal with default judgments in relation to
mixed claims, for both a specified sum of money and for an unspecified sum of money in a discrete manner, CPR 2000 has no provision
that says that a default judgment cannot be entered for a specified
sum of money and also for an unspecified sum of money.
The Court of Appeal found that C-Mobile did not need to provide any
further evidence other than stating that winding up would dramatically
affect the Company’s operation since it was self-evident that winding
up would cause serious and irreparable harm to the reputation of
C-Mobile.
The Court of Appeal held that in all the circumstances, it was clear that
if Huawei pursued the liquidation proceedings, the appeal against the
order of the Judge in the Court below would be rendered nugatory
and that weighing the likely damage to C-Mobile’s reputation if
liquidation were pursued by Huawei against keeping Huawei out of the
money that it may be owed, the balance of justice favoured granting
the stay of proceedings.
The Court also held, it was clear the combined effect of CPR 12.8(3)
and 12.10 was that a default judgment may be entered for both a
specified sum of money and also for an unspecified sum of money and
that CPR 12.8(3) was not expressed in mandatory terms. As a result,
when entering default judgment in a claim for a specified sum of
money and for an unspecified sum of money, the claimant need not
abandon the claim for the unspecified sum of money and enter default
judgment only for the specified sum of money. It is left completely to
the claimant to decide whether he or she wishes to abandon or pursue
the claim for the unspecified sum of money.
The Court observed that it would not be right as a matter of law or
fairness to force a claimant to abandon a perfectly good claim for an
amount to be assessed merely because that claimant wishes to have a
final judgment by default in respect of a perfectly good claim for a
specified sum. Since the CPR makes it expressly clear that a claimant
may include in a claim form all or any other claims which may be
conveniently disposed of in the same proceeding, it would be incongruous to encourage such an approach, only to be forced to abandon
one or more claims, because of a Defendant’s default in obtaining
judgment against the defaulter.
INTERLOCUTORY APPEAL – APPLICATION TO SET ASIDE DEFAULT
JUDGMENT – WHETHER THE CIVIL PROCEDURE RULES 2000
PRECLUDES DEFAULT JUDGMENT FROM BEING ENTERED FOR A
SPECIFIED SUM OF MONEY AND ALSO FOR AN UNSPECIFIED SUM
OF MONEY – RULES 12.8(3) AND 12.10 OF THE CIVIL PROCEDURE
RULES 2000
conyersdill.com /
13
CAYMAN ISLANDS
CAYMAN ISLANDS
CAYMAN ISLANDS
July
DERIVATIVE ACTION - ABUSE OF PROCESS - GCR O.15 – TEST FOR
GRANT OF LEAVE
Nedgroup Trust (Jersey) Limited -v- Renova Industries Limited and ors
(Unreported) (22 July 2014)
An application was made by the Plaintiff pursuant to GCR O.15, r.12A
(2) for leave to continue a multiple derivative action. The parties are
very closely related to the litigation Renova Resources Private Equity
Limited -v- Gilbertson and others [2012] 2 CILR 416, which involved the
same investment fund and company/exempted limited partnership
structure known as the Pallinghurst Structure. However, this particular
action concerned the first Defendant’s (“RIL”) acquisition and subsequent sale of a shareholding in an Australian mining company (“Consmin”) and whether or not that acquisition was made as another
investment of or for the same investment fund as part of the Pallinghurst Structure.
The Plaintiff is the trustee of the Gilbertson family trusts and owns 50%
of the shares in Pallinghurst (Cayman) General Partner LP (GP) Limited
(the “Company”). The claim was brought by the Plaintiff on behalf of
14
/ conyersdill.com
the Company. The second Defendant, Mr Kuznetsov, is the chief
investment officer of RIL, and the third Defendant, Mr Vekselberg, is
the ultimate owner and chairman of RIL. The Plaintiff claimed that it
was agreed between the Company, as the ultimate general partner of
the sixth Defendant (the “Master Fund”), and RIL, that RIL would
acquire the shares in Consmin for the benefit of the Master Fund. The
Plaintiff further claimed Mr Kuznetsov and Mr Vekselberg were aware
of the agreement but instead sold the shares and kept the profit for
themselves.
The relief sought against RIL on behalf of the Company was damages
for breach of contract, breach of trust, breach of agency and an
account of the profit made by RIL on the subsequent sale of the shares
in Consmin.
Mr Justice Foster identified the appropriate test for the grant of leave
to continue a derivative action as the prima facie case test, which was
set out in the Renova -v- Gilbertson ruling at para 32:
…where a Defendant in a derivative action has given notice of intention
to defend, the Plaintiff must satisfy the Court that the company has a
prima facie case against the Defendant (and that the action falls within
the applicable exception the rule in Foss -v- Harbottle).
It was agreed the action fell within the applicable exception to the Rule
in Foss -v- Harbottle, and so Justice Foster went on to consider
CAYMAN ISLANDS
whether the Plaintiff could show that it had a prima facie case against
the Defendants on the merits. In this respect, Justice Foster again
referred to the Renova -v- Gilbertson ruling where he stated that:
I must be satisfied in the exercise of my discretion that the [Plaintiff’s]
case is not spurious or unfounded, that it is serious as opposed to a
speculative case, that it is a case brought bona fide on reasonable
grounds, on behalf of and in the interest of the Company and that it is
sufficiently strong to justify granting leave for the action to continue
rather than dismissing it at this preliminary stage.
Justice Foster found, the Plaintiff had nothing more than a very weak
case on the merits, on the basis that RIL had purchased the shares in
Consmin at its own risk and that any understanding otherwise was
likely subject to a condition which was never met. Further, that Mr
Gilbertson, through the Plaintiff, was using the Company to further
pursue his personal fight with Mr Vekselberg, as highlighted in Renova
-v- Gilbertson, and therefore the claim was not brought bona fide or
in the interests of the Company. In the circumstances, Justice Foster
refused leave to continue the derivative action.
His Lordship then went on to consider the Defendant’s contention
that the claim amounted to an abuse of process, following the
principle set out in the case of Henderson -v- Henderson (1843) 3
Hare 100. It was recognised by the Court that abuse of process cases
must now be read in light of the more recent House of Lords decision
in Johnson -v- Gore Wood & Co (a firm) [2002] 2 AC 1, and that:
The bringing of a claim or the raising of a defence in later proceedings
may amount to abuse of process if the Court is satisfied that the claim
or defence should have been raised in the earlier proceedings… The
Court should take a broad, merits-based approach which takes
account of all the facts of the case and focusing on whether a party is
misusing or abusing the process of the Court.
The Judge found overwhelming similarities between the claim and
the Renova -v- Gilbertson litigation: both involved the same investment fund structure, background, Company and individuals. The only
difference being the Renova -v- Gilbertson litigation involved the
proposed investment of the Master Fund in Fabergé rights as
opposed to an investment by the Master Fund in Consmin shares,
however, the latter was also the subject of evidence and comment in
the first litigation.
In defending the abuse of process allegations, the Plaintiff relied
heavily on the fact that it was not party to the Renova -v- Gilbertson
litigation, which was brought on behalf of the Company by Renova
Resources rather than the Plaintiff (Fairbairn). However, the Judge
found although in each case the claim was brought on the Company’s
behalf by a different shareholder, it was substance and not form that
was relevant, and, in that respect, there was no difference between
the two proceedings because in each case the real Plaintiff is the
Company. Further the non-party argument failed because Mr
Gilbertson, who is a Defendant in Renova -v- Gilbertson and a
beneficiary of the trust to which the Plaintiff is trustee, has an interest
in the outcome of both proceedings. Thus, the degree of identity
between Mr Gilbertson and the Plaintiff is such that the Plaintiff
should be treated as a party common to both actions for the purpose
of the abuse of process principles.
Justice Foster then considered the second stage of the test for abuse
of process and determined the present claim should have been heard
in the previous action. His Lordship found no compelling reason why
the claims could not have been made in Renova -v- Gilbertson, and
that commencing separate proceedings caused an unnecessary
duplication of time, effort and costs, which was not in the interests of
the public or the administration of justice. His Lordship rejected the
Plaintiff’s argument that it had reserved the right to bring the claim in
the present proceedings by giving notice of a potential claim to the
Defendants during the Renova -v- Gilbertson litigation. In the
circumstances, the Plaintiff and/or Mr Gilbertson should have sought
directions from the Court so the appropriate orders and/or case
management directions could have been made, which would have
been to bring both claims in the same proceedings.
Justice Foster also found in any event the claim should be dismissed
pursuant to the principles set out in Nurcombe -v- Nurcombe and
another [1985] 1 All ER 65. Firstly, in Renova -v- Gilbertson, Mr
Gilbertson was found to be in breach of his fiduciary duties as a
director of the Company on behalf of which the Plaintiff, which is also
the trustee of Mr Gilbertson’s trust, brought the present proceedings.
Secondly, a subsidiary of the Plaintiff, Autumn Holding Assets Inc., is
pursuing an appeal as one of the Defendants in Renova -v- Gilbertson.
That appeal is plainly against the interests of the Company, whose
interests the Plaintiff was proposing to represent in the present
proceedings. His Lordship considered in the circumstances the claim
was being used in an inequitable manner and should not be allowed
to continue.
conyersdill.com /
15
CAYMAN ISLANDS
October
SECURITY FOR COSTS – INDEMNITY BOND – WHETHER INDEMNITY BOND PROVIDED REAL SECURITY
Caribbean Islands Development Ltd -v- First Caribbean International
Bank (Cayman) Limited (Unreported) (8 October 2014)
By way of summons the Plaintiff sought an order to retrospectively
vary a Security Order (and subsequent unless order) so the Plaintiff
would be allowed to provide security for costs by way of after-theevent insurance and an unconditional and irrevocable bond in the
sum of US$100,000 (the “Indemnity Bond”). The Plaintiff had
obtained the Indemnity Bond from QBE Insurance (Europe) Limited,
a London based international insurer and reinsurer.
In determining whether the Indemnity Bond was capable of discharging the security order, the Chief Justice applied the test in the English
case of Versloot Dredging BV -v- HDI Gerling Industries Versicherung
AG [2013] EWHC 658 (Comm) as stated by Justice Chrisopher Clarke:
The essential question for the Court in deciding on what security is
acceptable is whether what is proposed does indeed provide real
security. This it may do if it amounts to a promise which would in all
likelihood be honoured, given an entity with the wherewithal to pay
and against whom enforcement can readily be obtained; in short, if
given a truly creditworthy entity.
The Chief Justice considered the terms of the Plaintiff’s Indemnity
Bond and found that in the circumstances the Defendant would have
to incur the additional expense of obtaining English legal advice, on
the basis that the Indemnity Bond was governed by English law, to be
satisfied as to whether it provided real security. Further, that in the
event judgment was given against the Plaintiff, the Defendant would
be required to seek enforcement of the Indemnity Bond in England, if
a dispute arose as to its terms. And finally, there was a degree of
uncertainty and real concern as to whether the Indemnity Bond
would cover costs orders already made in the Defendant’s favour and
which already would consume one half of the security provided by
the Security Order.
The Chief Justice found it settled principle that the purpose of an
order for security for costs is to ensure that a successful Defendant
will have a fund available within the jurisdiction of the Court against
which it can enforce the judgment for costs. In the circumstances, the
16
/ conyersdill.com
Chief Justice found the Indemnity Bond did not provide ‘real security’,
as per the test in Versloot, and therefore was incapable of discharging
the Security Order.
The positive for Cayman liquidators to draw from this Ruling is, the
Chief Justice appears to recognise, in principle, that an indemnity
from an ATE insurer may be good security for costs in certain
circumstances. This is welcome news for liquidators with good claims
to bring on behalf of cash strapped liquidation estates since security
in this form is cost effective but also provides good security for the
Defendant. However, if liquidators are to provide security in this form,
they must ensure the bond is governed by Cayman Islands law and
capable of being enforced by the Cayman Islands Court.
Michael Mulligan of Conyers Dill & Pearman (Cayman) Limited acted
for the Plaintiff.
TRUSTS – INVESTMENT PORTFOLIO – VESTING OF TRUST ASSET
- LEGAL OR BENEFICIAL OWNER – RESULTING TRUSTS – IMPACT
OF STRUCTURE ON CAPITAL GAINS AND INHERITANCE TAX
J.F. and M.F. -v- Hexagon Investment Limited, New Zealand Trust
Corporation and ors (Re the Hexagon Settlement and the Hope Trust)
(Unreported) (22 October 2014)
The Plaintiffs moved with their children from the UK to New Zealand
in 2001. They purchased a home there and brought with them certain
assets. However, two substantial investment portfolios remained with
Rathbone Brothers Plc and Merrill Lynch in their London offices
(respectively, the “Rathbone Portfolio” and the “Merrill Portfolio”).
In 2004, having lived in New Zealand for three years, the Plaintiffs and
their children all acquired New Zealand citizenship. The Plaintiffs were
then introduced to G.C., a New Zealand lawyer, whom they ultimately
instructed to advise them in regards to the management of the
family’s investments. G.C. advised the Plaintiffs, in order to avoid
certain New Zealand tax liabilities on their worldwide assets, they
would need to ‘ring-fence‘ those assets offshore. He suggested using
an offshore vehicle into which assets neither brought into New
Zealand, nor originating in New Zealand, could be placed. Hexagon
Investment Limited (“HIL”), a Cayman Islands company, was subsequently formed for this purpose.
The Plaintiffs gave evidence that, from the outset, it was their
understanding the Rathbone Portfolio and the Merrill Portfolio
CAYMAN ISLANDS
(collectively the “Portfolios”) would be transferred to HIL absolutely.
Also, they would retain full control over those assets as the sole
Directors of HIL and they could wind up HIL at any point to recover
the assets.
Shortly thereafter, the Plaintiffs became aware of the possibility of the
introduction of a capital gains tax and inheritance tax regime in New
Zealand, on the basis of a potential change in political parties at the
time. G.C. advised setting up the Hexagon Settlement, with HIL as
trustee, in order to have a structure ready in the event of future
unfavourable changes to the New Zealand tax regime, so there would
be a vehicle of recourse for the offshore assets.
Following G.C.’s advice in respect of HIL, the Plaintiffs instructed
Rathbone Brothers Plc to assign the Rathbone Portfolio to HIL. The
Plaintiffs then executed a client management agreement in respect of
the Rathbone Portfolio, in their capacity as directors of HIL. At no
point did the Plaintiffs believe they were transferring the Rathbone
Portfolio into the Hexagon Settlement.
The same was intended to occur in respect of the Merrill Portfolio.
However, this time, G.C. directly handled the transfer and instructed
Merrill Lynch that the Merrill Portfolio was to be transferred to HIL,
which would receive the assets acting in its capacity as trustee of the
Hexagon Settlement. The Plaintiffs were unaware of the details of this
correspondence.
The Plaintiffs decided to move back to the UK in 2009. However, prior
to their departure they received further advice from G.C. that, from a
New Zealand legal perspective, there were tax advantages to
resettling the Hexagon Settlement’s holding of assets unto another
New Zealand trust with NZTCL, a New Zealand trustee (the second
Defendant). Relying on this advice, the Plaintiffs subsequently
instructed NZTCL to settle the Hope Trust, with itself as sole trustee,
for the purpose of holding the Portfolios on Trust. Then, immediately
following their return to the UK, the Plaintiffs instructed Rathbone
Brothers Plc to transfer “all assets of the Hexagon Settlement” to the
Hope Trust.
However, they were later advised by their UK lawyers that because
they were domiciled or deemed to be domiciled in the UK upon their
return, the subsequent transfer by HIL of the Portfolios to the Hope
Trust would have triggered a substantial charge to inheritance tax.
The Plaintiffs insisted that, had they known of the tax effects they
would never have authorised the transfer: On the basis that the
Portfolios were vested in HIL beneficially, and the Plaintiffs remain the
ultimate beneficial owners and directors of HIL, they would have
received advice from their UK lawyers not to enter into the Hope Trust
transfer.
The question for the Court was therefore whether HIL received the
Portfolios: 1) as legal or as beneficial owner; 2) as trustee of the
Hexagon Settlement; or 3) on resulting trust for J.H. and M.H.
The answer depended on the Court’s determination of the Plaintiff’s
intentions at the time of making the Portfolio transfers. The Chief
Justice applied the principles set out in Vandervell -v- IRC [1967] 2 AC
291 and Sillett -v- Meek (2007) 10 ITELR 617 and adopted the following approach: 1) assess whether the documentation effecting the
original Portfolio transfer discloses the intentions of the Plaintiff; 2) if
it does not, then consider the entirety of the extrinsic evidence as to
the Plaintiff’s intentions; 3) if the evidence is conclusive, then declare
according to its meaning and effect; 4) if the evidence is inconclusive
on the balance of probabilities, fall back upon the relevant presumption (which was in this case, a resulting trust).
The Chief Justice found, on the basis of the documents and extrinsic
evidence, there was compelling evidence to suggest that the expressed intentions of the Plaintiffs was that they never wished to
alienate the beneficial interests in the Portfolios, which indicated they
never intended to settle the Portfolios in trust: in addition to the
Plaintiffs own affidavit evidence, the Rathbone client management
agreement was signed by the Plaintiffs as Directors of the account
holder, HIL; documents sent to Rathbone for the purposes of opening
the account in the name of HIL were the incorporation documents
and not the deed of the Hexagon Settlement; the books of Rathbone
record HIL as the “owner” of the Rathbone Portfolio; and, the
W8-BEN forms (certificate of foreign status of beneficial owner for US
withholding tax) listed HIL as beneficial owner of the Portfolios. In
fact, as the Chief Justice indicated, a great deal of the confusion,
giving rise to most of the issues in the case, was due to G.C.’s “proneness to error” and miscommunication.
Finally, a further argument was raised by counsel for the third to sixth
Defendants in respect of the Hexagon Settlement, which contained a
clause that required acceptance of any assets to be added to the
Settlement, specifically providing: “all money instruments and
property paid or transferred to and accepted by the Trustee…as
conyersdill.com /
17
CAYMAN ISLANDS
additions to the Trust Fund”. Counsel argued that, regardless of the
clause in the Hexagon Settlement, when the transferee is the trustee
(in this case, HIL as trustee for the Hexagon Settlement), a presumption arises that the property is transferred to him as an addition to the
existing trust.
However, the Chief Justice found, the presumption, derived from In re
Curteis’ Trusts (1872) L.R. 14 Eq. 217., would only apply where not
precluded by the express terms of a valid settlement. The clause in
the Hexagon Settlement indicated a pre-condition for acceptance by
the trustee of the assets being transferred, requiring a positive action
on the part of the trustee, which had not occurred. The Chief Justice
recognised that such clauses were commonplace and were included
for good reason: it prevents a trustee from being saddled with
burdensome assets that could give rise to considerable liabilities for
the trust, only to have to go to the trouble of disclaiming them.
In the circumstances, the Chief Justice concluded the Portfolios never
became vested in HIL as trustee of the Hexagon Settlement, but
instead as absolute owner. It therefore followed that, the purported
transfer of the Portfolios from the Hexagon Settlement to the Hope
Trust, on the Plaintiffs return to the UK, was ineffective, as there were
no such assets to be transferred.
18
/ conyersdill.com
INDEX
INDEX
Cases By Subject
Section:
Companies
5 Bermuda – Court of Appeal - Section 103 of The Companies Act, 1981 – Minority Shareholder – Definition of Holder and Purchaser
6 Bermuda – Supreme Court - Company Law - Declaratory Relief – Interim Injunction – Removal of Directors – Serious Issue to be Tried – Balance of Convenience
7 Bermuda - Placing Agreement – Change of Control – Urgent
Injunction to Restrain Special General Meeting – Appropriate
Forum (BVI)
8 Bermuda – Supreme Court - Statutory Demand – Section 62 of
The Companies Act, 1981 – Effective Service – Registered Office
11 BVI – Court of Appeal - Amendment to Company’s Articles of
Association by Shareholders’ Resolution – Compulsory Redemption of Shares Pursuant to Shareholders’ Resolution – Whether
Resolution in Interests of Company – Applications to Adduce
Fresh Evidence
Procedure
7 Bermuda – Supreme Court - Placing Agreement – Change of
Control – Urgent Injunction to Restrain Special General Meeting
– Appropriate Forum (BVI)
7 Bermuda – Supreme Court - Review of Registrar’s Taxation – Costs
– Order 62
12 BVI – Court of Appeal - Interlocutory Appeal – Failure to Comply
With Case Management Order – Relief from Sanctions – Rule 26.8
of The Eastern Caribbean Supreme Court Civil Procedure Rules
2000 – Bald Assertions Made in Affidavit in Support of Application for Relief from Sanctions – Whether Adequate for Purpose of
Determining Whether Criteria Satisfied for Grant of Relief –
Whether Learned Judge Erred in Granting Respondent Relief from
Sanctions
12 BVI – Court of Appeal - Interlocutory Application – Stay of
Execution – Exercise of Court’s Discretion to Grant Stay of
Proceedings – Whether Stay of Judge’s Order in the Lower Court
Should be Granted Pending Hearing and Determination of Appeal
of that Judge’s Decision – Whether Failure to Grant Stay of
Liquidation Proceedings Would Render Appeal of Judge’s
Decision Nugatory – Rule 62.19 of The Civil Procedure Rules 2000
– Arbitration Ordinance – Insolvency Act
13 BVI – Court of Appeal - Interlocutory Appeal – Application to Set
Aside Default Judgment – Whether The Civil Procedure Rules
2000 Precludes Default Judgment from Being Entered for a
Specified Sum of Money and also for an Unspecified Sum of
Money – Rules 12.8(3) and 12.10 of The Civil Procedure Rules 2000
16 Cayman - Security for Costs – Indemnity Bond – Whether
Indemnity Bond Provided Real Security
14 Cayman - Derivative Action - Abuse of Process - Gcr O.15 – Test for
Grant of Leave
Insolvency
8 Bermuda – Supreme Court - Statutory Demand – Section 62 of
The Companies Act, 1981 – Effective Service – Registered Office
8 Bermuda – Supreme Court - Section 99 of The Companies Act,
1981 – Note Creditors – Contingent Creditors – Definition of
Creditor
9 Bermuda – Supreme Court - Statutory Demand – Section 161 of
The Companies Act 1981 – Adjournment of Petition
conyersdill.com /
19
17
INDEX
INDEX
Cases By Subject
Section:
Trusts
10 Bermuda – Supreme Court - Trusts – Specific Performance – Lien
Over Trust Assets – Status Quo – Control of Books and Records Indemnity
12 BVI – Court of Appeal - Commercial Appeal – Trust Fund – Entitlements of Beneficiaries – Construction of Provisions of Trust Deed
– Whether Trustee Had Power to Effect Variation of Trust Deed in
Accordance With Wishes of Settlor – First Appellant Removed
From List of Beneficiaries and Entitlements of Remaining Beneficiaries Altered by Settlor – Whether ‘Words of Entitlement’ in
Annexure of Trust Deed by Which Appellants Were Initially Made
Beneficiaries Conveyed Immediate, Absolute and Indefeasible
Interest in Trust Assets in Favour of Appellants
16 Cayman - Trusts – Investment Portfolio – Vesting of Trust Asset
- Legal or Beneficial Owner – Resulting Trusts – Impact of Structure on Capital Gains and Inheritance Tax
18 //conyersdill.com
20
conyersdill.com
BERMUDA
HONG KONG
Clarendon House
2 Church Street
P.O. Box HM 666
Hamilton HM 11
Bermuda
2901 One Exchange Square
8 Connaught Place
Central
Hong Kong
Tel: +1 441 295 1422
[email protected]
Narinder K. Hargun
Head of Litigation, Co-Chair
[email protected]
B E R M U DA
BRITISH VIRGIN ISLANDS
Tel: +852 2524 7106
[email protected]
BRITISH VIRGIN ISLANDS
LONDON
Commerce House, Wickhams Cay 1
P.O. Box 3140
Road Town, Tortola
British Virgin Islands VG1110
10 Dominion Street
London EC2M 2EE
United Kingdom
Tel: +1 284 852 1000
[email protected]
Mark J. Forte
Head of Litigation
[email protected]
Tel: +44 (0)20 7374 2444
[email protected]
C AY M A N I S L A N D S
DUBAI
H O N G KO N G
LO N D O N
M AU R I T I U S
SINGAPORE
co nye r s d i l l .co m
CAYMAN ISLANDS
MAURITIUS
Boundary Hall, 2nd Floor
Cricket Square
P.O. Box 2681
Grand Cayman
KY1-1111
Cayman Islands
Level 3, Tower I
Nexteracom Towers
Cybercity, Ebene
Mauritius
Tel: +230 404 9900
[email protected]
Tel: +1 345 945 3901
[email protected]
Nigel K. Meeson Q.C.
Head of Litigation
[email protected]
DUBAI
SINGAPORE
Level 2
Gate Village 4
Dubai International Financial Centre
P.O. Box 506528
Dubai, U.A.E.
9 Battery Road
#20-01 Straits Trading Building
Singapore 049910
Tel: +9714 428 2900
[email protected]
Tel: +65 6223 6006
[email protected]