Village Cay Marina Ltd v Acland et Al

JurisdictionUK Non-devolved
CourtPrivy Council
JudgeLord Hoffmann
Judgment Date04 Mar 1998
Docket NumberPrivy Council Appeal No. 48 of 1997

Privy Council

Lord Hoffman

Lord Lloyd of Berwick

Lord Nolan

Lord Hope of Craighead

Sir Leggatt

Privy Council Appeal No. 48 of 1997

Village Cay Marina Limited
and
Acland et al

Company law - Directions — Duties — Refusal of director to request a transfer of 49 shares in a company to appellant — Court allowed the appeal stating that there was no adequate basis on which the Court of Appeal could have rejected the finding of the trial judge that the director believed in good faith that the registration would not be in the interests of the company.

Lord Hoffmann
1. Appeal and Cross-appeal.
1

This is an appeal and cross-appeal from a judgment of the British Virgin Islands Court of Appeal. The appeal concerns the validity of certain underleases of residential units in a development at Wickhams Cay, Road Town, in the island of Tortola. They were granted on 23rd September 1991 by the plaintiff, Village Cay Marina Limited (“VCM”) acting by its receiver, the fourth respondent Mr. Greenwood, at the direction of the second respondent Landac Development Limited (“Landac”), to the third respondent, Rhyto Investments Limited (“Rhyto”). The cross-appeal concerns the validity of the refusal of the first defendant, Mr. Acland, as sole director of Landac, to register a transfer of 49 shares in that company to VCM. The appeal and cross-appeal both arise out of transactions by which the development was undertaken, but the issues which they raise are quite different.

2. The Facts.
2

The issues, both before the trial judge (Georges J.) and the Court of Appeal, originally ranged very widely, but the concurrent findings of fact of both tribunals enable their Lordships to state the history of the matter in a form which is now largely uncontroversial. On 28th November 1988 a Mr. Clifford Plaisance, who had just acquired the issued share capital of VCM, entered into an agreement with Mr. Acland for a joint venture in the residential development of a part of the land which the company held under a registered Crown lease. Pursuant to this agreement, Landac was incorporated, 51 shares were issued to Mr. Acland and 49 to Mr. Plaisance and Mr. Acland was appointed sole director. Mr. Acland lent Landac $150,000 which, pursuant to an oral agreement made on 29th May 1989, Landac paid to VCM in return for an option to require the grant of subleases of the proposed residential units to such persons as it should nominate for a nominal consideration. This oral agreement was confirmed in writing in an agreement made between VCM and Landac on 29th June 1990 which was duly registered against VCM's title to the land.

3

At the time of the joint venture agreement of 28th November 1988 Barclays Bank plc (“the Bank”) held an alimonies debenture issued by VCM which created a floating charge over its assets and undertaking and a fixed charge over all its fixed assets, including the site of the proposed development (“the site”). The joint venture agreement was originally conditional upon the Bank agreeing to release the site from the debenture so that it could be separately charged to secure borrowings for the construction costs of the development. But the Bank would not agree to this proposal. Instead, after the agreement to grant an option to Landac, VCM granted the Bank a specific legal charge over the site which was registered as a first charge in the Land Registry. The charge was expressed to secure all monies owing by VCM but referred in particular to a facility for construction costs which was, at VCM's request, to be made available to Landac.

4

Mr. Plaisance died in January 1990. His executors renounced probate and letters of administration were granted to his widow Debra Plaisance and his son Kim Plaisance. It appears that under the terms of his will the beneficial interest in his 49 shares in Landac passed to his widow.

5

On 19th December 1989 a writ of fi fa. was issued pursuant to a default judgment for $2,027 obtained against VCM by a creditor in the previous month and on 29th May 1990 it was executed against the company's property. The debt was discharged by a cheque issued by Mr. Kim Plaisance on behalf of the company. The significance of this event is that clause 8(b) of the debenture of 9th November 1988 provided that the monies thereby secured were to become immediately payable if “a distress or execution shall be levied or issued against any of the property of the Company.” By clause 9 the Bank was entitled to appoint a receiver at any time after the money thereby secured had become payable. There is however no evidence that the Bank knew of the execution at the time. On 24th September 1990 it wrote to VCM saying that it was exceeding its overdraft limit and formally demanding repayment of $32,647 within 24 hours. Their Lordships do not know what happened in consequence of this letter or anything else about the state of VCM's account before 23rd August 1991, when the Bank appointed Mr. Greenwood receiver under clause 9 of the debenture. Their Lordships must assume that for some reason the Bank omitted the usual formality of demanding repayment of the overdraft facility before appointment of the receiver, because the only ground relied upon by Mr. Greenwood (in his re-amended defence) for saying that the monies secured by the debenture had become payable was the execution which had been issued over a year earlier.

6

On 23rd September 1991 VCM granted the disputed underleases to Rhyto, which had been nominated for this purpose by Landac in the exercise of its rights under the option agreement of 29th June 1990. The leases were executed under the common seal of VCM by direction of the receiver. They were duly registered and charged by Rhyto to the Bank to secure all monies due from Rhyto, including in particular a facility of $1,040,000. It is the validity of these underleases which is in issue in the appeal.

7

Mr. Anthony Esposito, who was at the time when the receiver was appointed in negotiation to obtain the finance to acquire control of VCM, telephoned the Bank that same evening from New York to protest. The judge found that he did not challenge the validity of the appointment but said that it was a matter of “regret and inconvenience” in view of the state of his current negotiations. The board of VCM did not challenge the appointment of the receiver by legal proceedings and on the day after the appointment the company's solicitors wrote to the receiver, reminding him that he had a duty to the company to obtain full market value for its assets and saying that it would shortly be acquired by a company controlled by Mr. Esposito under arrangements by which its indebtedness to the Bank would be discharged not later than 31st August 1991. There seems to have been some delay because on 31st October 1991 the solicitors wrote again, suggesting that Mr. Greenwood file the annual return “signed by yourself as receiver on behalf of the company” and on 12th November 1991 they asked for information on the “current state of affairs regarding the receivership”. On 18th November 1991thesolicitorsnotified the Companies Registry that “by directive of the Receiver” the registered office had been changed. On 24th January 1992, when VCM's overdraft stood at $160,000, an agreement was reached under which the receiver was discharged on the basis that VCM would continue to enjoy an overdraft facility of up to $200,000 until the acquisition and refinancing to which Mr. Esposito had referred the previous August had been completed. This in fact happened on 27th August 1992, when VCM, Mr. Greenwood and the Bank signed mutual releases in comprehensive form.

8

At the same time as Mr. Esposito's company, called Village Cay Holdings Limited, finally acquired the shares in VCM from the Plaisance estate, he also agreed to acquire the 49 shares which the estate held in Landac. He wanted these transferred to VCM and so on the same date of completion, 27th August 1992, Kim Plaisance and Debra Plaisance, as administrators of the estate of Clifford Plaisance, executed a transfer of the shares in favour of VCM. On 7th September 1992 VCM's solicitors presented it to Mr. Acland for registration and on 24th September 1992 he wrote back declining to do so. It is this refusal which gives rise to the cross-appeal.

3. The judgments of Georges, J. and the Court of Appeal.
9

Their Lordships will summarise the conclusions of Georges, J. and the Court of Appeal under two heads, dealing first with the validity of the underleases, which forms the subject matter of the appeal, and secondly with the refusal to register the transfer of shares in Landac. They will omit reference to those parts of the judgments dealing with issues no longer in dispute, which have already been summarised in the statement of the facts.

  • (a) The Underleases.

    • (1) The learned judge held that the appointment of the receiver was valid because the Bank was entitled to rely upon the execution of May 1990 as making the monies secured by the charge payable. He also decided that whether the Bank was entitled to appoint a receiver or not, VCM had acquiesced in the appointment and was estopped from disputing its validity. The Court of Appeal did not decide whether or not the appointment had been valid because it agreed with the judge on estoppel.

    • (2) VCM argued before the judge that a receiver appointed under the debenture could not grant underleases of the site because the Bank had agreed to exclude the site from the debenture and rely upon the specific legal charge granted by VCM on 10th July 1989. The learned judge found as a fact that the Bank had refused to exclude the site from the debenture and that the specific legal charge was by way of additional security. The Court of Appeal agreed that no agreement by the Bank to exclude the site from the debenture had been proved.

    • (3) VCM argued that the receiver had acted in breach of...

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