Galantis v Alexiou and another
| Jurisdiction | UK Non-devolved |
| Judge | Lord Lloyd-Jones |
| Judgment Date | 08 April 2019 |
| Neutral Citation | [2019] UKPC 15 |
| Date | 08 April 2019 |
| Docket Number | Privy Council Appeal No 0077 of 2017 |
| Court | Privy Council |
[2019] UKPC 15
Lord Reed
Lord Carnwath
Lord Hodge
Lady Black
Lord Lloyd-Jones
Privy Council Appeal No 0077 of 2017
Hilary Term
Civil Practice and Procedure - Appeal — Relationship of sections 272 and 280 of the Bahamian Companies Act, 1992 — Whether the conduct giving rise to oppression needed to be continuing at the time of the application to the court.
Stephen Hofmeyr QC
Anna Gotts
(Instructed by Clyde & Co LLP)
Kahlil D Parker
Roberta W Quant
(Instructed by Cedric L Parker & Co)
This appeal raises an important issue in the company law of The Bahamas, namely the relationship of sections 272 and 280 of the Bahamian Companies Act 1992 (“the 1992 Act”).
By a written agreement dated 8 July 1998 Mr Zachary James Galantis (“the respondent”) sold his shareholding in a Bahamian company BK Holdings Ltd, with its interest in a lease and its inventory of goods, to another Bahamian company, Ali-Cat Designs Ltd (“the company”) for B$500,000. At that date the directors of the company were Mr Antony Alexiou (“the first appellant”) and Mr Alexander Alexiou (“the second appellant”). The company paid B$300,000 of the purchase price in cash and the parties agreed that the balance would be paid by instalments secured by a promissory note of the same date.
By 6 February 1999 the company had paid the respondent B$36,506.34 towards the B$200,000 debt secured by the promissory note. Thereafter, the company refused to make further payments to the respondent pursuant to the promissory note.
On 22 October 1999 the respondent issued proceedings in the Supreme Court of The Bahamas (“Supreme Court”) against the company claiming B$182,531.70 in respect of the balance due under the promissory note, interest, damages and costs. On 17 February 2005 the respondent obtained judgment in those proceedings for the full amount claimed plus further interest and costs. An appeal by the company to the Court of Appeal of The Bahamas was dismissed on 14 November 2005. The company never paid the judgment debt.
In 2007 the appellants were examined under oath before the Assistant Registrar of the Supreme Court as part of the process of enforcing the judgment against the company. During this process the respondent formed the view that the company's failure to pay involved unfair and oppressive conduct on the part of the appellants. In particular, he learned that the business he had sold to the company had been “converted” by the first appellant, in conjunction with Bahama Republic Ltd, a Bahamian company owned and operated by the first appellant, and which was operating a retail store on the company's former business premises.
By letter dated 14 August 2008 the Deputy Registrar General informed attorneys acting for the appellants that the company had been removed from the register of companies as of 25 July 2008.
On 21 April 2009, the respondent commenced the present proceedings in the Supreme Court against the appellants in their capacity as former directors of the company. The respondent sought relief pursuant to section 280 of the 1992 Act which enables a complainant, as defined in section 278, to apply to the court for an order against a company or a director or officer of that company to restrain oppressive action.
On 29 November 2010 the Supreme Court (Hepburn J) ruled that the respondent was a proper person to institute an action under Part IX of the 1992 Act against the appellants as directors of the company.
On 30 May 2014 the Supreme Court gave judgment refusing the substantive relief sought by the respondent. Hepburn J was satisfied that the first appellant had acted in his capacity as a director of the company in a manner that was oppressive or unfairly oppressive to and/or that unfairly disregarded the respondent's interests as a creditor of the company. Furthermore, she was satisfied that the second appellant had at the very least acted in his capacity as a director of the company in a manner that unfairly disregarded the respondent's interest as a creditor of the company. However, she held that the respondent was not entitled to relief under section 280 because the proceedings had been commenced after the company had been removed from the register. In such circumstances the oppression was not ongoing.
On 4 May 2016 the Court of Appeal allowed the respondent's appeal. It awarded declaratory relief and ordered compensation in the sum of B$182,531.70 (with interest thereon) plus B$35,811.00 (with interest thereon). In its reasons for its decision, delivered on 7 December 2016, the Court of Appeal held that a liability of the appellants under section 280 continued by virtue of section 272.
The relevant provisions of the 1992 Act provide:
“Part IV …
81. (1) Every director and officer of a company in exercising his powers and discharging his duties shall–
(a) act honestly and in good faith with a view to the best interests of the company; and
(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
(2) The duty imposed by subsection (1) on the directors of a company is owed by them to the company alone; and the duty shall be enforceable in the same way as any other fiduciary duty owed to a company by its directors.
(3) Every director and officer of a company shall comply with this Act and with the articles of the company.
(4) The burden of proving that a director or an officer of the company did not act in accordance with any provision of this section shall lie on the person making the allegation.
Part VIII …
271. (1) The Registrar may remove from the register of companies—
(a) a company that fails to submit any return, notice, document or prescribed fee to the Registrar as required by this Act;
(b) a company that is dissolved;
(c) a company that has amalgamated or merged with one or more companies;
(d) a company that refuses to comply with any request or direction given by the Registrar pursuant to this Act;
(e) a company whose registration is revoked or cancelled in accordance with this Act;
(f) a company that has ceased to carry on business.
(2) Where the Registrar is of the opinion that a company is in default with respect to any requirement as to a return, notice, document or prescribed fee, he shall send a notice to that company advising it as to the default and stating that, unless the default is remedied within twenty-one days after the receipt of the notice, the company shall be removed from the register of companies.
(3) After the expiration of the time specified in the notice, the Registrar may remove the company from the register and publish a notice of that fact in the Gazette.
(4) Where a company is removed from the register of companies, the Registrar may, upon receipt of an application, before the expiration of twenty years from the publication in the Gazette of the notice aforesaid, in the approved form and upon payment of the prescribed fee, restore the company to the register and issue a certificate in the approved form.
272. Where a company is removed from the register of companies pursuant to section 271, the liability of the company and of every director, officer or member of the company shall continue and may be enforced as if the company had not been removed from the register.
273. Where a company is removed from the register of companies pursuant to section 271 the company shall thereupon be dissolved and any property vested in or belonging to any such company shall thereupon vest in the Treasurer for the benefit of The Bahamas and shall not be disposed of without the prior approval of both Houses of Parliament signified by resolution thereof. …
Part IX …
…
278. In this Part—
“action” means an action under this Act;
“complainant” means—
(a) a shareholder or debenture holder or a former holder of a share or debenture of a company;
(b) a director or an officer of former director or officer of a company or its affiliates;
(c) any other person, who in the opinion of the court is a proper person to institute an action under this Part.
279. (1) Subject to subsection (2), a complainant may for the purpose of prosecuting, defending or discontinuing an action on behalf of a company apply to the court for leave to bring an action in the name and on behalf of the company or any of its subsidiaries or intervene in any action to which any such company or any of its subsidiaries is a party.
(2) No action may be brought, and no intervention in an action may be made, under subsection (1) unless the court is satisfied that_
(a) the complainant has given reasonable notice to the directors of the company or its subsidiary of his intention to apply to the court under subsection (1) if the directors of the company or its subsidiary do not bring, diligently prosecute or defend, or discontinue, the action;
(b) the complainant is acting in good faith; and
(c) it appears to be in the interests of the company or its subsidiary that the action should be brought, prosecuted, defended or discontinued.
(3) In respect of an action under subsection (1), the court may at any time make any order it deems fit having regard to all the circumstances, including—
(a) an order authorizing the complainant or any other person to control the conduct of the action:
(b) an order giving directions for the conduct of the action; …
280. (1) A complainant may apply to the court for any order against a company or a director or officer of that company to restrain oppressive action.
(2) If upon an application under subsection (1), the court is satisfied that in respect of a company or any of its affiliates—
(a) any act or omission of the company or any of its affiliates effects a...
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