Court of Appeal



(1) MFP-2000, LP -v- (1) Viking Capital Limited (2) Misa Investments Limited [2014] CA (Bda) 1 Civ (22 July 2014)

On 29 September 2011 Viking Capital Ltd & Misa Investment Ltd ("V&M"), 95% majority holders of the relevant ordinary shares in Viking River Cruises Ltd. ("VRC"), gave a Section 103(1) notice to MFP 2000 to purchase its 2.4% minority holdings of ordinary shares in VRC. Following the activation by that notice of the appraisal process, V&M transferred all of their 95% majority holdings to an associated company, Viking Cruises Ltd ("VC"). In the resultant re-structuring of V&M and its associated companies, VC emerged as the holders of virtually all of VRC. In short, the 95% majority shareholders of VRC transferred all their shares in it to themselves under another corporate name.

Section 103(1) of the Companies Act, 1981 identifies the start of a mechanism described in the remainder of the section by which holders of a 95% majority of shares or class of shares, on service of a notice on the remaining minority holders, may compulsorily purchase the latter's shares, subject to entitling them all to the same terms. On V&M's case, 95% majority holders responsible for initiating such a process may have recourse to the mechanism for which it provides, whether or not thereafter they, the 95% majority holders, retain their holdings. On MFP's case, V&M, having divested themselves of their 95% majority holdings following service of the notice on which they rely, had no locus standi to resort to Section 103.

The issue turned on the respective meanings of, and relationship between, the words 'holders' and 'purchasers' in Section 103(1).

The Judge at first instance ruled that, notwithstanding the transfer by V&M to VC of their 95% majority holdings in VRC during the appraisal period, V&M, as 'purchasers' within the meaning of that word in Section 103, remained entitled to acquire MFP's shares at a price to be fixed by the Court. The conclusion of the first instance judgment was that: "... Section 103 provides a mechanism whereby the holders of not less than 95% of the shares in the company can purchase the shares of the minority. That means the holders of not less than 95% of the shares at the date when a Section 103 notice is given. The majority need not retain their shares until the minority shares have been acquired or the notice cancelled".

The Court of Appeal agreed and held that the word 'purchasers' cannot sensibly refer to persons or bodies who were not 95% majority shareholders responsible for activation of the Section 103 processes in question. In summary, 95% majority holders who give notice under Section 103 may proceed to purchase remaining minority holdings subject to and by means of appraisal if invoked, even if they or some of their number, have in the meantime divested themselves voluntarily or involuntarily of all or part of their holdings.

In the view of the Court of Appeal, the structure and wording of Section 103 obliges and entitles 95% majority holders who have served a Section 103(1) notice to acquire the remaining minority holdings, whether or not they remain 95% majority holders at the time of any appraisal invoked by the minority holders. Section 103(1)'s opening words, "The holders ... hereinafter in this Section referred to as the 'purchasers', simply presage the mechanism set out in the remainder of the provision by which they, the 'holders' responsible for giving the notice, become and remain entitled, until completion of the appraisal process and subject to compliance with it, to acquire the minority shares.

The above conclusion would be sufficient in itself to resolve the appeal in favour of V&M. However, the Court of Appeal added that it agreed with the First Instance Judge's observations that Section 103 has as its dominant purpose the facilitation of ready corporate restructuring while also providing fair treatment to minority holders.

Accordingly, the Court dismissed MFP's appeal and held that V&M remained entitled under their Section 103(1) notice to acquire MFP's shares at a price yet to be fixed.

Supreme Court



Ministry of Finance -v- O [2014] SC (Bda) 60 Civ (17 July 2014)

Section 6 of the 2005 Act imposes a statutory duty upon a person served with a production order to provide the information sought, provided that, it is within his possession or control. The 2005 Act is silent as to who should bear the costs of compliance.

In an earlier ruling of the Court, the Defendant, "O", was ordered to produce copies of various documents to the Plaintiff. The question of who, as between the Plaintiff and the Defendant, should bear the costs of complying with the order was adjourned to this hearing.

The Judge held that competing policy considerations urged upon him by the parties, while persuasive, were evenly balanced and therefore cancelled each other out. Despite this, it was considered desirable that there should be a common approach to the costs of production orders, whether made in criminal or regulatory proceedings. In the absence of a settled practice in Bermuda, the Judge proposed to adopt the practice as to the costs of criminal production orders made in England and Wales. Thus, it was held in the case of production orders made under TIEAs and served on third parties in the financial services industry, the third party Respondent should generally bear the costs of compliance with the order. It followed that the Defendant was ordered to bear its costs of complying with the earlier production order.



Oung Shih Hua James -v- Paladin Limited [2014] SC (Bda) 62 Com (14 August 2014)

The Plaintiff in this case is seeking a declaration that a lawfully convened special general meeting ("SGM") of the Defendant company was held on 1 August 2014 and that various resolutions were validly passed thereat; most significantly, resolutions that removed or purportedly removed certain directors and appointed new directors. For the purposes of this hearing, the Plaintiff sought interim injunctive relief (to restrain the Defendant Board members the Plaintiff contends were validly removed, from purporting to act on behalf of the Company).

In applying the test for an injunction, the Judge first considered whether there was a serious issue to be tried. It was explained to the Court by the plaintiff that before any business could be conducted at the SGM, the Chairman had raised concerns about the propriety of certain nominees to the Board and purported to adjourn the meeting, in his discretion, without seeking the direction of the meeting itself. The meeting continued with an acting Chairman being 'appointed' and the proposed resolutions were duly passed. In this respect, the Judge noted that according to the byelaws, there was no open-ended unfettered discretion in the Chairman of a general meeting to post pone or adjourn a meeting and the power to adjourn can only be exercised at the direction of the shareholders. The Judge also noted this proposition to be consistent with general notions of English-based company law supported in argument by reference to National Dwellings Society -v- Sykes [1894] 3 Ch. 159. The Judge therefore held there was a serious issue to be tried, namely whether the SGM was in fact validly continued, and whether those persons who are purporting to still be Board members are not.

The Judge went on to hold that the balance of convenience was in favour of granting injunctive relief. An overwhelming factor was that the 'rival Board', had accepted, in a notification through the Hong Kong Stock Exchange, that there should effectively be a standstill until matters can be clarified. The Judge therefore held, the status quo, which is an uncertain Board composition, should be preserved until a trial can take place as soon as possible.

The Judge noted that it was clearly in the interests of justice generally and the reputation of Bermuda and the Hong Kong Stock Exchange for a dispute about who controls a company to be resolved at the earliest possible opportunity. The Judge granted the interim injunction sought and gave directions for an expedited trial.


(1) Gold Seal Holding Limited (2) Five Star Investments Limited (3) Oung Shih Hua (also known as James Oung) (4) Huang Weizong Martin (5) Kwok Wai chi -v- (1) Paladin Limited (2) Chen Te Kuang (also known as Mike Chen) (3) Law Fong [2014] SC (Bda) 66 Civ (27 August 2014)

Paladin Limited, the first Defendant, is a Bermudian company listed on the Hong Kong Stock Exchange which is ultimately owned by various members of the Oung family. The present proceedings were commenced by the controllers of the first Defendant to challenge the implementation and validity of a 29 April 2014 Placing Agreement and resolution transferring control over Paladin to the second and third Defendants, and purportedly approved by Paladin's Board of Directors on 19 May 2014.

On 21 May 2014, Hellman J granted an ex parte Injunction restraining the implementation by Paladin of the said Placing Agreement. Following an inter partes hearing on 29 May 2014, he discharged that injunction on the grounds that, inter alia, there was no serious issue to be tried and that damages would have been an adequate remedy. On 13 June 2014, the Plaintiffs filed a Statement of Claim in which an additional complaint emerged. The Board of Paladin were alleged to have failed to convene a special general meeting ("SGM") requisitioned by the first and second Plaintiffs under Section 74 of the Companies Act, 1981, who accordingly themselves convened the SGM for 16 June 2014. The Defence filed on 26 June 2014 countered that the Board itself had duly convened a SGM and that the 16 June 2014 SGM had not been validly convened. The purpose of the SGM was in practical terms for the controllers of Paladin to reassert control of the composition of the Board.

In this application, the second Defendant sought an urgent injunction restraining Paladin from holding a SGM due to be held on the 1 August 2014 and from putting to its shareholders at any meeting any resolutions, or otherwise passing or putting into effect any resolutions, which have the effect, directly or indirectly, of altering the Board composition of the Respondent. The Judge refused this application and made the following useful observations:

In the present case, the only substantive causes of action explicitly supported by evidence lay against the second Defendant, Five Star Investment Limited ("Five Star"), which is resident in the British Virgin Islands, and related to matters (the status of its shareholding and the proposed exercise of its corporate power through voting its shares in Paladin at the SGM) that are primarily governed by BVI law. It was not contended by the second Defendant that the BVI Court was not competent to grant injunctive relief in support of any arguable claim that the exercise of Five Star's power to vote its shares in Paladin ought properly to be restrained pending a determination of the dispute as to who was entitled to control Five Star.

Accordingly, BVI appeared to be both the most appropriate forum for the substantive action concerning the control of a BVI company and the most suitable venue for seeking the specific type of interim relief sought instead from this Court.

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