Conyers Offshore Case Digest (Issue No.11 April - December 2015)

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BRITISH VIRGIN ISLANDS CIVIL APPEAL - EX PARTE HEARING - COURT’S COSTS JURISDICTION - CIVIL PROCEDURE RULES - SERVICE OUT OF JURISDICTION OF NON-PARTY COSTS APPLICATION - WHETHER JUDGE ERRED IN DISMISSING APPLICATION TO SERVE PARTY OUT OF THE JURISDICTION - RULE 7.3 OF THE ENGLISH CIVIL PROCEDURE RULES, 2000 - RULE 7.14 OF THE ENGLISH CIVIL PROCEDURE RULES, 2000 - SECTION 11 OF THE EASTERN CARIBBEAN SUPREME COURT (TERRITORY OF THE VIRGIN ISLANDS) ACT Halliwell Assets Inc et al -v- Hornbean Corporation Claim No. BVIHCMAP 2014/0017 (October 2015) The Appellants were granted costs orders against the Respondent, Hornbeam Corporation and by notice of application sought a third party costs Order against Mr. Shulman. Mr. Schulman was not a party to the Claim and is a foreigner. This Appeal is against the decision of the Learned Judge below to grant permission to serve the application notice out of the jurisdiction on Re Shulman. The Court of Appeal held that although Rule 7.3(10) (on service of a claim where jurisdiction was provided for by an enactment) did not apply to an application for third party costs, it was fairly arguable that Rule 7.14 could provide the Court with the requisite jurisdiction to serve the application out of the jurisdiction if Mr. Schulman could be successfully joined to it and the Claim would qualify for service out of the jurisdiction. While recognising that at first blush Rule 7.14 did not appear to be limited to parties who were already parties to an action and after examining the relevant English authorities, which construed similar provisions under the English Civil Procedure Rules, the Court of Appeal recognised that service out of the jurisdiction of an application under Rule 7.14 was not permissible without more and it was necessary to show that the proceedings in which the application was issued would be one which would qualify for service out under one of the gateways contained in Rule 7.3. CIVIL APPEAL - TRUST DEED - DISCRETIONARY TRUSTS - DEED OF APPOINTMENT - POWER OF APPOINTMENT UNDER TRUST - WHETHER POWER OF APPOINTMENT IN TRUST DEED PERMITS TRUSTEE TO EXCLUDE A NAMED BENEFICIARY FROM THE OBJECTS OF A DISCRETIONARY TRUST IN ADVANCE OF APPOINTING CAPITAL TO OTHER NAMED BENEFICIARIES Re: Royal Fiduciary Group Limited Claim No. BVIHCMAP 2013/0022 This is an Appeal against the Learned Judge’s refusal to sanction the terms of a draft deed of appointment, the effect of which would be to disentitle the Settlor from benefiting under the trust deed, on the basis, inter alia, that the Trustee had no power to vary the Trust deed as contemplated by the draft deed of appointment and would be a nullity. In allowing the Appeal and granting the declarations sought in the Court below, the Court held applying Muir -v- Inland Revenue Commissioners [1966] 1 WLR 1269 and Blausten -v- Inland Revenue Commissioners [1972] Ch. 256 that a trustee, in the absence of any contrary indication and in the face of a power of appointment in the Trust deed authorising the Trustee to appoint property among beneficiaries could validly appoint property among two or more objects of the Trust while excluding altogether one or more objects. The Court, after examining the facts of the case, primarily the justification for the intended variation, found that it could “see no reason based on principle, in terms of the powers of trustees in the exercise of powers of appointment under a trust deed, why the trustee in this case could not properly exercise the power of appointment conferred on him by the trust instrument in excluding the settlor from benefiting under the trust, with the resulting increase in the property interests available for distribution to the children and remoter issue of the settlor, who are obviously the intended beneficiaries of the settlor’s benefaction”. The Court found that the appropriate course would be for the Court to consider the joinder application and to determine it, on its merits, along with the non-party costs application and permissions to serve out. The Appeal was allowed and the matter remitted to the Court below. 8
BRITISH VIRGIN ISLANDS INTERLOCUTORY APPEAL - DERIVATIVE PROCEEDINGS - INTERPRETATION OF SECTION 184C(2)(C) OF BVI BUSINESS COMPANIES ACT, 2004 (AS AMENDED) - MEANING OF ‘LIKELY’ IN WORDING ‘WHETHER THE PROCEEDINGS ARE LIKELY TO SUCCEED’ - APPEAL AGAINST FINDINGS OF FACT MADE BY LEARNED JUDGE Basab Inc. -v- Accufit Investment Inc. and Double Key International Limited Claim No. BVI HCMAP 2014/0020(November 2015) The Appeal concerns the refusal by the Court to grant leave to the Appellant pursuant to Section 184C(2)(c) of the BVI Business Companies Act, 2004 (as amended) (the “BCA”) to commence derivative proceedings on behalf of the first Respondent, for what it contends was the sale at an undervalue of the shares in its wholly owned subsidiary. The Learned Judge’s refusal was based on his Judgment that the intention and effect of Section 184C(2)(c), was that for a claim to be ”likely to succeed” it must be obvious, without any substantial consideration of or debate on the merits that it is likely to succeed and the proposed Claim must appear to the Court to be self-evidently strong without conducting an inquiry. He observed the application for leave under Section 184C was not an occasion for painstaking analysis of valuation or other evidence and based on a limited examination of the evidence found that the Appellant’s Claim was not likely to succeed. The Court of Appeal dismissed the Appeal. They found that the Learned Judge’s interpretation and application of Section 184C(2)(c) of the BCA was wrong because it seemed to be moving into the realm of requiring a strong likelihood or almost requiring certainty that the proceedings would succeed. Applying the case of Cream Holdings Limited and Others -v- Banjeree and Others [2004] UKHL 44, the Court found that the correct meaning of the phrase “whether the proceedings are likely to succeed” in Section 184C(2)(c) of the BCA was “whether it is more probable than not that the proceedings will succeed”. The Applicant was therefore not required to demonstrate that success was an absolute certainty, or that the probability of success was very strong. The Court further held that with regard to the level of examination of the evidence required in the present case, the threshold for the grant of leave to bring derivative proceedings – “whether it is more probable than not that the proceedings will succeed” – would require a full and proper examination of the evidence then before the Court. The Court further held that the potential nature of derivative claims, especially those that may be both complex and defended, did not predispose themselves to a cursory review and required the Court to evaluate the evidence before it and the arguments advanced by both parties in order to determine “whether the proceedings are likely to succeed”. However, having exercised its discretion afresh, the Court held that the evidence did not show that the proceedings were likely to succeed and dismissed the Appeal on that basis. INTERLOCUTORY APPEAL - CIVIL PROCEDURE RULES - APPELLANTS’ DEFENCE STRUCK OUT IN COURT BELOW BY LEARNED JUDGE FOR NON-COMPLIANCE WITH PREVIOUS ORDER OF COURT WHICH REQUIRED THAT COSTS BE PAID PRIOR TO LATE FILING OF DEFENCE - JUDGMENT ENTERED FOR RESPONDENT IN HER ABSENCE - WHETHER LEARNED JUDGE ERRED IN STRIKING OUT APPELLANTS’ DEFENCE AND ENTERING JUDGMENT FOR RESPONDENT IN HER ABSENCE - WHETHER STRIKING OUT OF DEFENCE AND ENTRY OF JUDGMENT BY LEARNED JUDGE WAS CONTRARY TO CIVIL PROCEDURE RULES (“CPR”) 27.2(3) AND RULES OF NATURAL JUSTICE Agnes Danzie et al -v- Cecil Anthony Claim No. SLUHCVAP 2015/0009 (December 2015) This Appeal is against the decision of the Court below to strike out a defence following the failure by the Respondent to satisfy an Order that costs be paid prior to the filing of its defence, and to enter summary judgment in the Respondent’s absence without taking evidence. In allowing the Appeal, the Court of Appeal held that while Civil Procedure Rule (“CPR”) 26.3(1)(a) gave the Court a discretion to strike out a statement of case or part of one where it appears to the Court that there has been a failure to comply with a rule, practice direction, order or direction given by the Court in the proceedings, it is a well-established principle that this power should only be used sparingly. The Court further held that in exercising his discretion, the Learned Judge was required to consider what was the appropriate response having regard to all of the circumstances, including whether there were other alternatives available that would be just in the circumstances and that having regard to the very wide case management powers of a Judge, striking out the Appellants’ defence was not an appropriate response to the breach of the order of the Learned Judge by the Appellants. (Real Time Systems Limited -v- Renraw Investments Limited and Others [2014] UKPC 6 applied). 9
Page 1 and 2: APRIL 2015 - DECEMBER 2015 ISSUE NO
Page 3 and 4: ABOUT THE DIGEST The Offshore Case
Page 5 and 6: BERMUDA the parties involved can be
Page 7 and 8: BERMUDA apply to many cases, and as
Page 9: BRITISH VIRGIN ISLANDS INTERLOCUTOR
Page 13 and 14: BRITISH VIRGIN ISLANDS standing, ot
Page 15 and 16: CAYMAN ISLANDS On 18 September 2012
Page 17 and 18: CAYMAN ISLANDS J (applying Section
Page 19 and 20: CAYMAN ISLANDS The Judgment of the
Page 21 and 22: INDEX Arbitration 7 BVI - CIVIL APP

Conyers Offshore Case Digest (Issue No.11 April - December 2015)

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