British Virgin Islands: Privy Council Dismisses Appeal In BVI Unfair Prejudice Proceedings

Walkers has successfully acted for its client, Successful Trend Investments Corporation ("STIC"), a company incorporated in the British Virgin Islands (the "BVI") which is part of a conglomerate of companies embroiled in a long-running family dispute.

On 9 May 2022, the Judicial Committee of the Privy Council (the "Privy Council") promulgated its judgment in the matter of Kathryn Ma Wai Fong (Appellant) v Wong Kie Yik & 2 others (Respondents). The five-member panel (the "Board") unanimously dismissed all grounds of the appeal, which concerned allegations of unfair prejudice in relation to the affairs of STIC, the shareholdings of which are held in equal shares by Kathryn Ma Wai Fong ("Ms Ma", the widow of the late Wong Kie Nai ("WKN") from whom she inherited her shares), Wong Kie Yik ("WKY") and Wong Kie Chie ("WKC").

Following the death of WKN in 2013, STIC converted the non-voting preference shares which it held in a Malaysian company, WTK Realty Sdn Bhd (respectively, the "Conversion", the "CPS" and "WTK Realty") into ordinary shares.

Ms Ma filed proceedings in the BVI Commercial Court in which she claimed that the Conversion was unfairly prejudicial to her interests as a shareholder in STIC pursuant to section 184I of the BVI Business Companies Act (the "BCA"). In a judgment handed down on 14 December 2017, Justice Adderley [Ag] dismissed Ms Ma's arguments that the power to effect the Conversion was subject to equitable constraints, requiring unanimous shareholder approval, and that the Conversion was undertaken for an improper purpose, namely, to change the balance of voting power in WTK Realty from being in favour of Ms Ma's side of the family to being in favour of WKY and WKC's side of the family (which, it was unsuccessfully argued by Ms Ma, was in breach of their fiduciary duties as de facto directors of STIC). Ms Ma appealed to the Court of Appeal, which handed down its unanimous judgment on 27 March 2019, dismissing Ms Ma's appeal. Ms Ma then appealed to the Privy Council.

Of particular interest in the reasons promulgated by the Privy Council are its guidance in relation to the equitable considerations which may apply in the management of family companies and to the limitations on appellate courts in overturning concurrent findings of fact.

Ms Ma submitted that because the broad group of companies to which STIC belongs are "family companies" it follows that equitable constraints must apply to the management of STIC (which would have prevented the Conversion) and that a breakdown of trust and confidence between family members would be sufficient to found a claim under section 184I of the BCA. The Board reiterated the position set out by Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd, that the categories of cases in which equitable considerations arise are not closed and they are not limited to situations of quasi-partnership. However, the facts of the present case did not indicate the applicability of the equitable constraints contended for by Ms Ma. Further, the authorities do not support the proposition that a mere breakdown of trust and confidence between family members would be sufficient to found a claim under section 184I of the BCA – something further would be required, which would again depend on the facts of the case at hand.

Also central to the appeal were arguments by Ms Ma that the Courts below, in making findings of fact, had erred by failing to appreciate or properly take into account aspects of the evidence before the Court, such that the Privy Council should overturn certain concurrent findings of fact. In addressing this argument, the Board returned to the leading authority of Devi v Roy, in which it was held that concurrent findings of fact should not be interfered with except in rare cases where there has been some miscarriage of justice or violation of some principle of law or procedure. In response to Ms Ma's submission that this case was exceptional in nature, such that the Privy Council should overturn findings of fact as it did in the recent Bank of Ecuador case, the Board rejected the Appellant's arguments and confirmed that Bank of Ecuador should '... not be regarded by prospective appellants as a watering down of the principles in Devi v Roy as confirmed in many later cases'.

A copy of the judgment can be found here.

Although the factual background to the case is complex, the judgment promulgated by the Board is a concise reminder that the categories of cases in which equitable considerations arise are not closed and they are not limited to situations of quasi-partnership, but that they must be established on the facts of the case at hand, and that the cases in which an appellate court should interfere with concurrent findings of fact are rare and limited to cases where there has been some miscarriage of justice or violation of some principle of law or procedure.

The Walkers team representing STIC includes BVI based Oliver Clifton, and Hong Kong based Stuart D'Addona and Robert Gregory. Walkers instructed Adam Goodison of South Square Chambers.

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