On 21 January 2015 the Privy Council handed down its decision in
Nilon Limited v Royal Westminster Investments SA [2015]
UKPC 2 clarifying the power of the courts to rectify the share
register of a BVI company under section 43(1)(a) of the BVI
Business Companies Act 2004.
The background facts were quite complex, but in essence they
revolved around an oral agreement which was entered into between Mr
Varma on the one hand, and several members of the Mahtani family on
the other. There was some dispute as to the terms of that oral
agreement, but the Mahtani family alleged that Mr Varma had agreed
to incorporate a company (Nilon Limited) in the British Virgin
Islands and procure that shares were issued to members of the
Mahtani family. The Mahtani family members paid money (which they
said were subscription monies, and Mr Varma claimed were loans) to
Nilon Limited, and received interim payments back (which they said
were dividends, and Mr Varma claimed were interest payments) but no
shares were in fact ever issued to the Mahtani family members. They
brought claims against Mr Varma for breach of contract, and against
Nilon Limited for rectification of the share register to show that
they were holders of the shares which they claimed had been agreed
in the oral contract.
The issue which the Privy Council had to decide was whether the
Mahtani family members had a “good arguable case”
against Nilon Limited for rectification of the share register. If
they did not, then the claim against Nilon would need to be struck
out, and the claim against Mr Varma would also fail because Nilon
was the “anchor defendant” in BVI upon which the claim
against Mr Varma relied (Mr Varma was not resident in BVI, and so
the BVI courts would not otherwise have had jurisdiction over
him).
The claim of the Mahtani family against Nilon relied heavily upon
the decision of the English Court of Appeal in Re Hoicrest
Ltd [2000] 1 WLR 414. At first instance Justice Bannister had
ruled that Re Hoicrest was incorrectly decided, and struck
out the claim. But the Eastern Caribbean Court of Appeal had
reversed his decision, holding that Re Hoicrest was good
law. The parties then appealed to the Privy Council, and the
decision was handed down by Lord Collins.
Lords Collins agreed with Justice Bannister and reversed the Court
of Appeal, holding that Re Hoicrest was anomalous in that
every other decision in common law legal history had held that
there was no right to rectify the share register in such
circumstances. Accordingly, the only claim which the Mahtani family
had was for alleged breach of the oral contract, and that was a
claim which would need to be brought in the English courts, not the
BVI courts.
Although this was sufficient to dispose of the appeal, Lord Collins
went on to add some obiter dictum comments in relation to
the doctrine of forum non conveniens generally. Lord
Collins was critical of comments made by the Court of Appeal that
because the underlying subject matter of the dispute was shares in
a BVI company this meant that “the BVI was clearly the
appropriate forum for trial as a preliminary issue of the questions
arising between the members and alleged members of Nilon.”
Lord Collins disagreed, confirming that the primary issue here was
the validity of the contract, and the question of which court was
the most appropriate forum should be viewed as a matter of contract
rather than company law. Given Lord Collins’ status as editor
of the leading textbook, Dicey Morris & Collins on the
Conflict of Laws, those comments will attract great
weight.
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