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

BERMUDA
the parties involved can be anonymised in the cause book, for the
hearing to be heard in private and for subsequent access to court files
by the public to be restricted.
Confidentiality, however, is increasingly hard to find in modern courts.
The courts continually trend towards ever greater transparency. While
non-contentious trust actions were, in the past, heard in chambers
(which meant members of the public and the press were in practice,
left outside), chambers hearings are now held in court rooms to which
the public have ready access. Further, due to recent procedural
reforms in Bermuda, court papers held in the Registry are increasingly
open to public and media scrutiny.
Thus, confidentiality orders are in increasing demand. They can,
however, be hard to obtain. In England for example, such orders, even
in non-contentious matters, are treated as exceptional and only
granted on the basis of cogent evidence of need (V -v- T [2014]
EWHC 3432 (Ch) Civ). This effectively means that trustees must show
evidence of a security risk or dangers such as ‘false friends’ latching on
to minor beneficiaries.
In BCD Trust [2015] SC (Bda) 83 Civ, Kawaley CJ in an ex tempore
ruling adopted a liberal and pragmatic approach. The Chief Justice
emphasised that the Bermuda Constitution specifically permits the
Courts to hold hearings in private if it considers it necessary or
expedient for the protection of the private lives of the persons
concerned in the proceedings. He also commented that, in the
absence of any obvious public interest in knowing about internal trust
administration, it was in the public interest to deal with noncontentious
trust applications as private hearings.
Trustees who wish to obtain the Court’s guidance, while protecting the
privacy of the beneficiaries, can be confident that their privacy will be
protected.
COMPANY LAW - SHAREHOLDERS - TEST FOR UNFAIR PREJUDICE
- APPLICATION TO PUBLIC COMPANIES
Annuity & Life -v- Kingboard [2015] (Bda) LR 97
Shareholders who believe that they are being treated unfairly have
several remedies. One of the most effective can be an unfair prejudice
petition. Such petitions were historically rare in Bermuda, not least
because the hurdle is a high one. A petitioner must not only show that
its interests (as shareholder) have been unfairly prejudiced. It must
also show that the prejudice is so bad that it would justify the winding
up of the company on just and equitable grounds.
In Annuity & Life -v- Kingboard [2015] (Bda) LR 97, Kawaley CJ found
that this test had been met. What makes the case particularly notable
is that Kingboard is a company publically listed on the Singapore
Stock Exchange.
The shareholder’s allegations in Kingboard were two-fold. The first
allegation was that Kingboard had intentionally depressed its own
profitability. The Claim was that Kingboard, which produced copper
foil and sold it to affiliated companies, had been selling its copper foil
at an under-value. Shareholders in Kingboard, it was claimed, suffered
at the expense of shareholders in the affiliated companies. The
second allegation was that, when minority shareholders raised these
allegations and blocked Kingboard’s ability to sell its copper foil to
affiliates, as they had the power to do, Kingboard’s reaction had been
unreasonable. (Kingboard’s reaction had been to cease producing
copper foil altogether, instead licensing its production facilities to a
third party. The third party then proceeded to supply copper foil to
the same affiliates).
Much of the trial was taken up with the allegations of transfer pricing
and allegations as to whether or not the licensing arrangement was a
sham. Ultimately, Kawaley CJ rejected the transfer pricing allegations
in their entirety and also rejected the Claim that the license
arrangement was a form of sham. He did, however, find that
Kingboard’s reaction (ceasing all production of copper foil) to the
minority shareholders’ concerns about transfer pricing had been
unreasonable and “a visible departure from the standards of fair
dealing”. He concluded that the test for unfair prejudice had been met
and that the remedy was for the majority shareholders to purchase
the petitioner’s shares at a price to be assessed.
Both sides are appealing the Judgment and any appeal will likely not
be heard until 2017. However, the Kingboard decision shows the
power of the unfair prejudice petition and that it applies equally to
publicly listed companies as to private.
INTERNATIONAL COOPERATION (TAX INFORMATION EXCHANGE
AGREEMENTS) ACT, 2005 (THE “2005 ACT”) - CONTEMPT -
COSTS
Minister of Finance -v- A Company [2015] SC (Bda) 51 Civ (24 July
2015)
The Plaintiff alleged that the Defendant Company had failed to comply
with a Production Order made under the 2005 Act. It was common
ground that, by the date of the hearing, the Company had in fact
complied; the Plaintiff therefore sought the imposition of a fine.
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