Applied Enterprises Ltd v Interisle Holdings Ltd and Others [Eastern Caribbean Supreme Court]
| Jurisdiction | British Virgin Islands |
| Judgment Date | 21 June 2013 |
| Court | High Court (British Virgin Islands) |
| Docket Number | CLAIM NO. BVIHCV (COM) 2012/0135 |
| Date | 21 June 2013 |
EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
CLAIM NO. BVIHCV (COM) 2012/0135
(Section 6(2) Arbitration Ordinance 1976 — approach to be taken when application for a stay is met with an application for summary Judgment by claimant —Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd1 considered —Hayter v Nelson [1990] 2 Lloyds Rep 2652 followed)
Bannister J [Ag]: This is an application by the first defendant, Interisle Holdings Ltd, a BVI registered co (‘Interisle’), for a stay of these proceedings on the grounds that the agreement upon which they are based (‘the Agreement’) contains an arbitration clause which, says Interisle, requires this particular dispute to be referred to arbitration. It is met with an application by the Claimant, Applied Enterprises Limited (‘Applied’) for summary judgment.
Applied is a Hong Kong registered company which, at the time when the Agreement was entered into, owned the entire issued share capital in the second Defendant, Quorum Island BVI Ltd (‘Quorum’). There were 10,000 shares in issue. Quorum was the owner of a substantial holding of land on Beef Island, Tortola, upon which it was hoped to develop a resort, marina and golf course (‘the site’).
On 2 December 2005 Quorum entered into a development agreement with the Virgin Islands Government to develop the site and submitted planning applications on 6 August 2006. On 11 August 2006 it entered into Agreement with Applied and Interisle.
The underlying intention behind the Agreement was for Interisle to acquire 50% of Quorum's stock from Applied, but it was structured to achieve this by way of a redemption by Applied of 50% of its holding with a simultaneous allotment by Quorum to Interisle of the same number of shares. The nominal price payable by Interisle for the allotment was US$21 million, but it was open to Interisle to satisfy at least US$13 million of that sum by the payment of 50% (US$7.5 million) direct to Applied. That option was subject, however, to the agreement of the provider of the Development Loan from which, at any rate initially, it was envisaged by all parties that the payments would be made. The terms were that there was to be an initial payment of US$8 million, followed by two further payments, secured by a promissory note, of US$2.5 million (or a direct payment, with the lender's consent, to Applied of US$1.25 million) and US$10.5 million (or a direct payment to Applied of US$5.25 million. The initial payment, US$8m, was paid by Interisle, upon which 5,000 shares were allotted and issued to Interisle, in the first place conditionally. That condition was fulfilled in June 2007 and since then Interisle has been an equal shareholder with Applied in Quorum, with equal board representation. Qourum is thus deadlocked.
The second instalment was paid in December 2007, which left a balance of US$10.5m (or US$5.25m if payment was to be made to Applied direct). The arrangements were subsequently amended to take account, it would appear, of the difficulties which Interisle was having in raising finance after the 2008 credit freeze and on 9 April 2010 a final due date of 9 April 2011 was agreed for the payment of the final amount. The amendments under which this was done, unlike the Agreement itself, contained no reference to the payment being funded from any Development Loan. The final payment has not been made.
In those circumstances Applied relies upon provisions in the Agreement which provide for Interisle to surrender the shares for which it has not paid (2,500 out of the 5,000 which it currently holds) and for those shares to be reallotted to Applied.
In addition, upon the failure of Interisle to pay Quorum the balance of the redemption price (or of Interisle to pay Applied 50% of that balance) Applied became entitled to an allotment of additional shares in Quorum such that it would become holder of 80.17% of the entire issued share capital of quorum and Interisle's holding would be correspondingly reduced to 19.63%.
Despite demand being made, Interisle has refused to surrender the certificate for the outstanding 2,500 shares and, since Qourum is deadlocked, Applied has no means of bringing that about, or of effecting the other changes to which I have referred, without the assistance of the Court or the making of an arbitral award in its favour. Applied therefore commenced the present proceedings on 18 December 2012, seeking appropriate relief, including an order for the rectification of Quorum's register of members to reflect Applied's entitlements following Interisle's alleged default. On 5 February 2013 Interisle applied for a stay in reliance upon an arbitration clause contained in the Agreement. On 9 April 2013 Applied applied for summary judgment. Quorum has, for obvious reasons, played no active part at all.
The two applications have come on together and in accordance with the practice which had developed in England and Wales prior to the enactment in that jurisdiction of the 1996 Arbitration Act, Applied's summary judgment application was heard first, on the assumption that should it be determined in that application that Interisle had no real prospect of defending the claim, it would follow that there was no dispute capable of going to arbitration and therefore neither reason nor grounds for granting a stay.
The arbitration clause in the agreement reads as follows;
‘Any dispute relating to this agreement or the performance by the parties of their respective obligations under this Agreement that is not resolved after the parties’ good faith attempt at mediation and that does not require for resolution the joinder of persons that are not a party to this Agreement will be finally settled by arbitration. If such a dispute arises, either party hereto may initiate arbitration proceedings by serving on the other party a demand for arbitration. Any such arbitration shall be conduction by two (2) arbitrators selected from the American Arbitration Association roster of arbitrators and an umpire selected by both arbitrators.’
Mr Paul Dennis QC, who appeared together with Ms Willa Tavemier and Ms Nadine Whyte, for Applied, submits that the arbitration provision has noapplication. He says that one of Applied's claims for relief is an order for rectification of Quorum's register of members and that is something which can be ordered only by the Court. While the Court may order rectification of a company's register of members pursuant to s 43 of the Business Companies Act, 2004, there is no reason why such an order should not be made by an arbitral tribunal: Artemis Trustee Lt v KBC Partners3; so there is nothing in that point.
Next, Mr Dennis says that before rectification can be ordered, Quorum's registered agent must be a party to the proceedings in which the order is made. Since the Registered Agent, which is the third named Defendant, is not party to the arbitration agreement, an award of rectification would thus, submits Mr Dennis, be ineffective. There is nothing in this point either. The award would be against Quorum. There are ample powers for the Court, on application made, to ensure that Quorum's register of members was altered if Quorum did not act, without the need for it to have been party to any arbitration in which such an award was made.
That, however, does not exhaust Mr Dennis’ points in objection to the application for a stay. He relies upon the terms of section 6(2) of the Arbitration Ordinance, 1976 (‘section 6(2)', under which Interisle's application is made:
‘If any party to an arbitration agreement, other that a domestic arbitration agreement, or any person claiming through or under him, commences any legal proceedings in any court against any other party to the agreement, or any person claiming through or under him, in respect of any matter agreed to be referred, any party to the proceedings may at any time after appearance, and before delivering any pleadings or taking other steps in the proceedings, apply to the court to stay the proceedings; and the court, unless satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed of that there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings.’
Mr Dennis submits that in this case the Court should be satisfied that‘there is no dispute between the parties with regard to the matter agreed to be referred,' so that section 6(2) has no application.
Mr Dennis bases himself onChannel Tunnel Group Ltd v Balfour Beatty Construction Ltd4 at 680:
The appellants submit that even if s1 of the 1975 Act applies to cl 67, a stay should nevertheless be refused because “there is not in fact any dispute between the parties with regard to the matter agreed to be referred’. In summary, they say that there is only one ground upon which the respondents could even attempt to justify their stance in threatening to stop work whilst at the same time purporting to keep the contract in existence, namely that the matter falls within the civilian doctrine of ‘l’exception d'inexecution’, that it is common ground that this doctrine is capable of exclusion by express provision in the contract and that such an express exclusion is to be found in the words of cl 67(2), which provide that ‘the Contractor shall in every case continue to proceed with the Works with all due diligence…’ Thus, according to the appellants, the respondents really have no case at all, and since they have no case there cannot be any ‘dispute between the parties with regard to the matter...
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