Staray Capital Ltd and another v Cha, Yang (also known as Stanley) (British Virgin Islands)
Jurisdiction | UK Non-devolved |
Judge | Lord Mance,Lord Carnwath |
Judgment Date | 18 December 2017 |
Neutral Citation | [2017] UKPC 43 |
Court | Privy Council |
Docket Number | Appeal No 0031 of 2015,Privy Council Appeal No 0031 of 2015 |
Date | 18 December 2017 |
[2017] UKPC 43
Michaelmas Term
From the Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands)
Lord Mance
Lord Sumption
Lord Carnwath
Lord Hodge
Lord Briggs
Privy Council Appeal No 0031 of 2015
(also known as Stanley)
Appellants
Stephen Atherton QC
Oliver Clifton
Matthew Neal
(Instructed by Walkers and Blake Morgan LLP)
Respondent
Matthew Collings QC
Jayesh Chatlani
(Instructed by Harney Westwood & Riegels and Harcus Sinclair LLP)
Sidebottom v. Kershaw Leese and Co Ltd [1920] 1 Ch 154 – Citco Banking Corp NV v. Pusser's Ltd [2007] UKPC 13; [2007] 2 BCLC 483 – In re Charterhouse Capital Ltd [2015] EWCA Civ 536; [2015] 2 BCLC 627 – Central Bank of Ecuador v. Conticorp SA [2015] UKPC 11; [2016] 1 BCLC 26.
Rule 25 of the Judicial Committee (Appellate Jurisdiction) Rules 2009, as amended by the Judicial Committee (Appellate Jurisdiction) Rules (Amendment) Order 2013 – Section 184I of the BVI Business Companies Act 2004 –
Civil practice and procedure - Appeal and cross-appeal — Whether the respondent could cross appeal against the appellant having considered that the respondent had not sought to receive permission of the Privy Council to cross appeal — Whether the challenge to the validity of the resolution and amendment under Section 184I of the BVI Business Companies Act the respondent was seeking to vary the order of the Court — Relying on section 184I to invalidate the resolution and amendment, was an entirely different approach from relying on the absence of any factual basis for service of a redemption notice — Cross appeal should be heard as the respondent had maintained that it intended to include issues related to section 184I.
Company Law - Shareholders Resolution — Amendment to memorandum and articles of association of the company — Whether the trial judge erred in finding that the amendment directed a particular shareholder was sufficient to invalidate the amendment of the resolution — Evidence provided that the shareholder had acquired the shares fraudulently — Whether the majority shareholder should have expropriate the shares — Whether the Privy Council should interfere with the findings of facts of the judge — There was no compelling reason to interfere with the findings — Alleged misrepresentations — Issue of materiality — Appeal and cross appeal should be dismissed — View of the majority shareholder of the Company was determinative as to whether the clause should be utilised unless there was evidence that the view was one which no reasonable person could have held.
Heard on 9 November 2017
Lord Mance AND
On 20 March 2010 the second appellant, Mr Chen, met the respondent, Mr Cha, with a view to inviting his participation in a project to mine coking coal in Canada. Mr Cha made various representations to Mr Chen, and they agreed to go ahead together. On 22 March 2010, the first appellant company, Staray Capital Ltd (“Staray”), was incorporated to give effect to the project. Mr Chen was allocated 80% of the shares and Mr Cha 20%. Both were appointed directors. In June 2011 the company acquired a 5% interest in the corporate vehicle for the project, HD Mining International Ltd (“HD Mining”).
From May 2011 Mr Chen began to express interest in buying some or all of Mr Cha's shares. By about July 2011, their relationship had broken down. Mr Chen claimed that he had been misled by the representations made by Mr Cha. On 8 September 2011, Mr Chen caused Mr Cha to be removed as a director. On 26 October 2011 Mr Chen passed a shareholders' resolution amending Staray's memorandum and articles (“MOA”) as follows:
“The following be inserted as sub-regulation 3.8 of the Articles of Association:
‘3.8 If a shareholder is found to have:
a) Made material misrepresentations (whether fraudulent or negligent) in the course of acquiring its Shares; or
b) Committed an act that may result in the Company incurring or suffering any pecuniary, legal, regulatory or administrative disadvantage or liability or negative publicity which the Company might not otherwise have incurred or suffered,
(such Shareholder being a ‘Defaulting Shareholder’);the Company may compulsorily redeem any or all Shares held by the Defaulting Shareholder, by giving 15 days' notice to the Defaulting Shareholder (the ‘Compulsory Redemption Notice Period’).
Under expiry of the Compulsory Redemption Notice Period and such compulsory redemption under this sub-regulation 3.8 being exercised by the Company, such Defaulting Shareholder will be entitled to receive the fair market value (without discount for any minority stake) as determined by a recognised international third party business valuer (the ‘Valuation’) in respect of the shares so redeemed.’”
Also on 26 October 2011 Staray gave a 15-day notice purporting compulsorily to redeem the 20% shares held by Mr Cha. Staray claimed to be entitled to do so under both sub-clauses, (a) and (b), of clause 3.8.
At issue in the proceedings are two points: first, the validity of the resolution of 26 October 2011 amending clause 3.8 of the articles; and, second, the validity of the notice of the same date given under the amended clause (sub-clause (b) is no longer relied on).
Before turning to the substance of those issues, it is necessary to address an objection by Mr Atherton QC (for the appellants) to the first point being taken by the respondent at this level in the absence of permission to cross-appeal. Rule 25 of the Judicial Committee (Appellate Jurisdiction) Rules 2009, as amended by the Judicial Committee (Appellate Jurisdiction) Rules (Amendment) Order 2013, reads:
“(1) A respondent who wishes to argue that the order appealed from should be upheld on grounds different from those relied on by the court below, must state that clearly in the respondent's written case (but need not cross-appeal).
(2) A respondent who wishes to argue that the order appealed from should be varied must obtain permission to cross-appeal either from the court below or from the Judicial Committee.”
The issue, in short, is whether by raising the first point the respondent is arguing in effect that the order appealed from should be varied, or seeking simply to uphold it on different grounds. The Board would preface its consideration of this issue by noting that the Rules record that appeals are against orders, not judgments. In the ordinary course, the outcome of any claim or counter-claim addressed by a judgment should be recorded in an order. When no order at all is drawn up, or an order is drawn up which does not fully or accurately record the outcome, problems may arise in relation to an appeal, as the present issue illustrates. To set the scene for the Board's further consideration of the appellants' objection, reference must be made to the relevant steps in the proceedings before the lower courts.
Mr Cha commenced the present proceedings by claim form dated 11 November 2011. He relied on section 184I of the BVI Business Companies Act 2004. That section applies where a member of a company considers that:
“… the affairs of a company have been, are being or are likely to be conducted in a manner that is, or any act or acts of the company have been, or are, likely to be oppressive, unfairly discriminatory or unfairly prejudicial to him or her in that capacity …”
The relief claimed was: (1) an order amending the MOA to remove the additions and amendments made on 26 October 2011, (2) an order that Staray take no further steps to redeem his shares without his consent, and (3) an order that the Company does not issue any further shares without the consent of the claimant. The accompanying statement of claim focused on the alleged invalidity of the resolution. In its original form, its penultimate paragraph (para 29) also read: “Further, the claimant does not accept that he does fall within the new sub-regulation 3.8. …”
The relief claimed pursuant to section 184I and listed in paras (1) to (3) in the prayer at the end of the statement of claim repeated the relief prayed in the claim form. On 9 November 2011 Mr Cha obtained from Bannister J an ex parte injunction restraining further steps to redeem his shares, which was later extended until trial following an inter partes hearing.
The defence, served on 3 February 2012, asserted both that the resolution was validly passed and (in paras 27 and 35) that the redemption notice was validly given under it. Although there was no formal counterclaim, the pleading also averred that there had been misrepresentation and conduct allegedly satisfying sub-clauses (a) and (b) of clause 3.8. The reply, served on 2 March 2012, joined issue on all these matters. There were later amendments to all these pleadings. One amendment deleted the sentence quoted in para 6 above from para 29 of the original statement of claim. However, allegations about the validity of the resolution and the redemption notice remained in the amended defence, and the amended reply took reinforced issue with such allegations. Among these many allegations was included one to the effect that the redemption notice itself was “not bona fide or in the best interests of the Company” or “not for a proper corporate purpose”.
The trial took place in January 2013 before Bannister J, leading to a judgment dated 13 February 2013, in which he upheld the validity of the resolution, but held that no event had occurred falling within sub-clause (a) or (b) of clause 3.8. His conclusion, stated in para 90 of his judgment, was:
“For the reasons given above, Mr Cha is entitled to an injunction restraining Staray from proceeding upon the redemption notice of 26 October 2011....
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