Texan Management Ltd and Others v Pacific Electric Wire & Cable Company Ltd
| Jurisdiction | UK Non-devolved |
| Judge | LORD COLLINS |
| Judgment Date | 26 November 2009 |
| Neutral Citation | [2009] UKPC 46 |
| Docket Number | Appeal No 0018 of 2009 |
| Court | Privy Council |
| Date | 26 November 2009 |
[2009] UKPC 46
Lord Hope
Lord Scott
Lord Carswell
Lord Brown
Lord Collins
Privy Council
Appellant
Stephen Smith QC
(1 st– 4 th appellants)
Jack Husbands
(1 st & 2 nd appellants)
Paul Webster QC
Kerry Anderso
(3 rd & 4 th appellants)
(Instructed by Glovers Solicitors LLP)
Respondent
Richard Lissack QC
(Instructed by Charles Russell LLP)
Introduction
It has often been said that, in the pursuit of justice, procedure is a servant and not a master. This is a case, if the Court of Appeal for the Eastern Caribbean is right, where the law of procedure prevents the appellants from invoking a power which is designed to ensure that the litigation is centred in the court "in which the case may be tried more suitably … for the ends of justice," in the words of Lord Kinnear in Sim v. Robinow (1892) 19 R. 665, 668, adopted as part of English law in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460, 474, per Lord Goff of Chieveley.
Until it was de-listed as a result of the events which form the background to these proceedings, the claimant, and respondent on this appeal, Pacific Electric Wire & Cable Co Ltd ("PEWC"), was one of the largest listed companies on the Taiwan Stock Exchange, with over 300,000 shareholders. Its core business is in wire and cable products, but it has expanded into other businesses, including property, telecommunications, electronics, engineering, and financial services.
In 2003 trading in its shares was suspended following a write-off in its accounts of US$291 million. PEWC claims that in the period 1990 to 1997 three of its directors, its former Chairman (Tung Yu Jeh), President (Sun Tao Tsun) and Chief Financial Officer (Hu Hung Chiu) ("the three directors"), were guilty of breach of fiduciary duty ( inter alia) by using its funds to acquire investments for themselves. PEWC says that the investments were never reported to the board of PEWC and were not reflected in its financial statements, which were therefore incomplete, false and misleading.
PEWC has commenced proceedings in Hong Kong, Singapore, Beijing, the United States, and the BVI to recover or preserve the assets which it claims were purchased from its funds. The commercial purpose of one of the actions in Hong Kong and the action in the BVI is to obtain control of shares in a Bermuda company called PacMos Technologies Ltd ("PacMos"), which is listed on the Hong Kong Stock Exchange (but now suspended) and was formerly called PCL Enterprises Ltd and then Win Win International Holdings Ltd.
The three directors are said to have used a web of corporate vehicles to conceal the fact that PEWC had paid for, and therefore owned, the PacMos shares. Those companies included:
BVI
Texan Management Ltd ("Texan")
All Dragon International Ltd ("All Dragon")
Blinco Enterprises Ltd ("Blinco") Patagonia Ltd ("Patagonia") Super Wish Ltd ("Super Wish")
Hong Kong
Pacific Capital (Investment) Ltd ("PCI")
Pacific Capital (Asia) Ltd ("PC Asia")
PCL Holdings Ltd ("PCHL")
Bermuda
Prima Pacific (Holdings) Ltd ("PPH"), the shares in which were held as a nominee by a Mr Larry Horner ("Mr Horner"), an accountant who was also chairman of a PEWC subsidiary.
The defendants in the present proceedings, and appellants on this appeal, are the BVI companies Texan, All Dragon, Blinco and Patagonia (together "the appellants"). Their Lordships were informed by Mr Stephen Smith QC, who appeared for the appellants, that the registered shareholder of Blinco and Patagonia is Top Selection Ltd, a BVI international business company (the shares in which are bearer shares).
The Hong Kong proceedings
On September 23, 2004 PEWC commenced Action HCA 2203 of 2004 in Hong Kong against 15 defendants, including the three directors, Texan, and All Dragon. The subject matter of the action is said to be the PacMos shares.
The essence of what PEWC says is that PEWC's funds were injected into Texan, which was then used as the vehicle to buy PacMos shares. Texan acquired 50.1% of the shares in PacMos from its majority shareholders. This acquisition required a general offer to its shareholders to be made, with the result that Texan acquired a total of 155,610,000 shares in PacMos (making a total of 51.92%). A further 69,186,000 shares were subsequently purchased from the majority shareholders by Super Wish (another BVI company, which was a wholly owned subsidiary of Texan) and subsequently transferred to Vision 2000 Venture Ltd, a company controlled by one of the three directors.
Blinco and Patagonia were used by the three directors as top tier companies to hold the shares in PCHL, which in turn wholly owned PCI, which owned 51% of the shares in Texan. The other 49% was held by PPH, whose shares were held by Mr Horner as nominee. Subsequently the shares in Texan held by PCI and PPH were transferred to All Dragon.
PEWC says that each of these companies and the assets which they hold were acquired with its funds, and are held on trust for it. The pleading in the Hong Kong action does not make any clear distinction between the beneficial ownership of the shares in the various companies and the beneficial ownership of assets vested in those companies. The statement of claim pleads, in particular, that Texan holds the shares in PacMos acquired by it and Super Wish on trust for PEWC; and All Dragon holds all the shares in Texan on trust for PEWC.
The relief sought in the Hong Kong action includes claims for declarations that:
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(1) Texan holds on trust for PEWC 214 million (alternatively, 145 million) shares in PacMos;
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(2) All Dragon holds on trust or on constructive trust for PEWC the beneficial interest in the PacMos shares;
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(3) PCHL is indirectly wholly held by PEWC.
The prayer for relief does not contain a claim for a declaration that the shares in the appellants are held on trust for PEWC, but the body of the pleading makes that claim as regards Blinco and Patagonia (para 20(b)), Texan (para 44(c)(ii)), and All Dragon (para 66). The claim in relation to the ownership of All Dragon is no longer pursued in Hong Kong.
There are two other actions in Hong Kong. They relate to PEWC's claim to an interest in a commercial property, the West Block of South Horizons Commercial Centre, also said to have been purchased with PEWC's funds. In proceedings commenced on December 7, 2004 (Action HCA 2763 of 2004) against 21 defendants, including the 3 directors, All Dragon, Blinco and Patagonia, PEWC claims the beneficial interest in the property on the basis that its registered owners and their holding companies hold it on trust for PEWC. Patagonia and Blinco each held 50% of PCHL, which through other companies (including All Dragon) held the properties. PEWC claims the beneficial interest in all the shares in PCHL on the basis that Blinco and/or Patagonia hold them on trust for PEWC. The third action is HCA 2746/2004 in which PEWC claims the proceeds of sale of part of the South Horizons property.
The BVI proceedings
On June 9, 2005 PEWC commenced proceedings in the BVI. The Statement of Claim was amended on October 7, 2005 and re-amended on November 9, 2005. PEWC claimed (inter alia)
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(1) a declaration that the shares in Texan held by All Dragon are held on trust for PEWC;
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(2) an order directing the transfer of those shares to PEWC;
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(3) an order that PEWC be registered as the shareholder of the Texan shares in its share register;
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(4) an order prohibiting Texan from dealing with the PacMos shares;
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(5) an order for Blinco and Patagonia to issue new share certificates to PEWC and/or for the rectification of the share register of Blinco and Patagonia to show PEWC as sole shareholder;
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(6) declarations that all the shares in All Dragon held by Blinco and Patagonia are held on trust for PEWC.
Claims for declarations that (a) the shares in PCHL held by Blinco and Patagonia were held on trust for PEWC, and (b) the shares in Blinco and Patagonia were held on trust for PEWC, were deleted by amendment.
PEWC stated the purpose of the action in this way (para 5):
"In this action, PEWC seeks to recover the legal and beneficial interest in the shares of the first four defendants herein, the defendants being companies incorporated in BVI and are subject to the jurisdiction of this Honourable Court. In an action commenced in the Court of First Instance in the High Court of the Hong Kong Special Administrative Region, PEWC is seeking to recover the legal and beneficial interest in the PacMos shares and for accounts and inquiries …"
The Re-Amended Statement of Claim pleads that the three directors caused Texan to agree to purchase 50.1% of PacMos in June 1995, and that the sale was completed in August 1995; and Texan made an offer in July 1995 to acquire more shares so that it held about 155 million shares (51.92%).
The pleading, like that in the Hong Kong proceedings, is not easy to follow, but the claims to ownership are put in the following way:
Procedural history
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(1) PEWC is the true owner of Texan because (a) PEWC wholly owned PCHL, which in turn wholly owned PCI, which held 51% of the shares in Texan; (b) the remaining 49% was held through PPH, and the shares in PPH were the subject of a declaration of trust in favour of PEWC by Mr Horner.
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(2) The directors procured Mr Horner to transfer the 49% interest in Texan held by PPH to All Dragon.
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(3) The consequence was that All Dragon became the owner of all the shares in Texan.
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(4) PEWC is the ultimate holding company of All Dragon, whose shares are held by...
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