Bigler v Blettner et Al
| Jurisdiction | British Virgin Islands |
| Judge | Moore, J |
| Judgment Date | 01 January 2000 |
| Neutral Citation | VG 2000 HC 1 |
| Docket Number | Civil Suit No. 197 of 1993 |
| Court | High Court (British Virgin Islands) |
| Date | 01 January 2000 |
High Court
Moore, J.
Civil Suit No. 197 of 1993
J.S. Archibald Q.C. for the plaintiff
Paul Dennis for the first defendant
Company law - Sale of lease — Under agreement, the plaintiffs leased their yachts to the second named defendants in consideration of rents for the use of the said yachts — Payments to plaintiffs fell into arrears — First defendant entered a sale and lease back agreement with the owner of the defendant company with regards to the company's only asset, the marina — Plaintiff contended that such an agreement was calculated to defraud unsatisfied creditors of the company — Whether sale of company's lease held property to first defendant was voidable — Whether first defendant's intent to defraud was established and proved by civil standard — Court order that instrument of assignment be canceled and that the entire interest of the first defendant and the company be sold by public auction and plaintiff be at liberty to bid to satisfy judgment.
Suits number 197 of 1993 and number 58 of 1997 were consolidated. Of the parties to these actions, the second named defendant Caribbean Sailing Yacht Ltd was not represented before the court. It had not entered appearance. The principal parties William Bigler, personal as well as representative plaintiff (hereinafter the plaintiff), and Junes Donald Blettner the first named defendant (hereinafter the defendant) were present in court and provided the main testimony for their respective sides. But the defendant Blettner was also one of the 119 unsatisfied creditors on whose behalf Bigler was suing. A major player in this drama was Dr. Robert Van Ost. He was not called as a witness by either party. The only opportunity which the court was afforded of assessing his conduct and character was through the copious documentation produced at the trial which contained his writings or made reference to him.
Dr. Van Ost appeared to have the genius of keeping the unpaid boat owners from openly revolting by feeding them a diet of sanguine promises held just under their noses like the proverbial carrot. And they, like the moke in that sad story, kept hopefully plodding on in the forlorn hope that the assurance of payments which Van Ost dangled as being just out of reach, would eventually materialize.
The plaintiff's case was that the defendant was an it in relation to certain arrangements between the plaintiffs on the one side and the second named Defendant company (hereinafter referred to as CSY) whereby the plaintiffs leased their yachts to CSY in consideration of CSY paying them rents for the use of the said yachts. Under a written yacht lease agreement hereinafter referred to as the “yacht lease agreement”. The Caribbean Sailing yachts Limited CSY incorporated in the BVI had become a famous company in the Yacht Charter Business.
The moving spirit behind CSY was a Dr. Robert Van Ost, a Dentist of the United States of America and his son who played a subsidiary role in the affairs of CSY. Dr. Van Ost leased a facility of land in Baughers Bay, Tortola and set up CSY's Yachting business there. The plaintiff Bigler and 121 other persons (the other plaintiffs) leased their individual yachts to CSY under written contracts and were to be paid their rents periodically.
CSY did not perform as anticipated. The payments to the plaintiffs fell into arrears. The arrears to the collective plaintiffs reached millions of dollars. Dr. Van Ost wrote regularly to the plaintiffs explaining the difficulties which CSY was experiencing and promising to pay. He never did. The arrears continued to mount. Van Ost had established similar business in St.Vincent, Honduras and Miami. Those businesses too could not meet their obligations.
The only asset that CSY owned was the marina at Baugher's Bay, Tortola, leased from Lily Arosa Romney, the wife of the then Chief Minister Mr. Cyril Romney. It was mortgaged to the First Pennsylvania Bank, the predecessor bank of Banco Popular de Puerto Rico, for an amount which in 1983 stood at about $180, 000. In or about October 1983, when the Marina was valued in the region of $1, 000, 000 and with the plaintiffs still unsatisfied and rents remaining outstanding, the Defendant and Dr. Van Ost got together. Dr. Van Ost purported to sell the Marina to the Defendant for the sum of $300, 000 and upon condition that the Defendant would pay of the mortgage off $180, 000 which was then outstanding. Under the arrangement, the Defendant would acquire the Marina for the sum of $480, 000 which was far below its market value. Simultaneously with the purchase, the Defendant leased back the Marina to Dr. Van Ost.
The transaction of sale and lease back was attacked by the plaintiff on a number of grounds. First, it was contended that a sale and lease back by an insolvent person amounted to a fraud. It was not a usual commercial practice with regard to property in the British Virgin Islands. The sale of the property by an insolvent owner to a purchaser who was aware that the transaction effectively put the property out of the reach of the vendor's creditors amounted to a fraud upon those unsatisfied creditors of the vendor by both the vendor himself and the collaborating purchaser. The terms of the lease were heavily loaded in Mr. Blettner's favour. The option given to Dr Van Ost to buy balk the property was illusory in the light of his parlous financial situation. The repayments of $8,000.00 per month were crushingly onerous moreso because of his continuing obligation to the boat owners whereas Blettner was pocketing the handsome figure of $4, 000 per month. Eventually, Blettrier cancelled the option agreement, the property was now beyond the reach of the plaintiff creditors. They got nothing and Blettner became the owner of the property which had hitherto been the only asset of CSY. CSY itself had not yet satisfied in full or at all the judgment against it under Order 14 in Suit No. 118 of 1998 for 3.3 million dollars and costs now amounting to some $100,000.00.
In his written skeleton arguments Mr. Archibald Q.C. set out the background with which I an in complete agreement. I set it out here in full:
“2.1 From the agreed documents and undisputed oral testimony at the trial, it is common ground that the second defendant was at all material times a private limited liability company registered in the British Virgin Islands on 18 April 1967 and carried on a yacht charter and marina business coupled with restaurant, bar, provisioning store, gift shop, marina repair facility, haulage of yachts from the sea by railway for repair and haulage back to the sea; and was commonly known by the business names of CSY and CSY Marina (hereinafter called ‘CSY Ltd.’); that at all material tunes CSY Ltd was under the direction and control of its founder and president Dr. Jack Van Ost of the USA who was a professional dentist and businessman (hereinafter called “JVO(); that the first defendant James Donald Blettner (hereinafter called “Blettner”) was at all material times a businessman and engineer of Indiana in the USA who leased his yacht to CSY Ltd in 1978 for 7 years to be used for CSY Ltd.'s charter guests for a consideration of monthly rent to be paid to him by CSY Ltd according to a written yacht lease agreement (hereinafter called (yacht lease agreement(); that the plaintiff William Bigler of USA (hereinafter called (Bigler() a former USA Navy petty officer and a businessman was at all material times, like Blettner but from 1980, a similar yacht owner who entered into a 7-year lease charter agreement with CSY Ltd and in this arms sued on behalf of himself and 119 other unsatisfied creditors who claimed against CSY Ltd under similar yacht lease agreements which were entered into prior to 1983.
2.2 CSY Ltd carried on business rather successfully at first but by 1981 ran into financial trouble and was unable to pay monthly rents under the yacht lease agreements to Bigler and the 119 other persons aforesaid (hereinafter together called “the boat owners”).
2.3 JVO wrote repeatedly to the boat owners promising monthly rents which were never paid and by 31 October 1983 CSY Ltd owed the boat owners US$1, 778, 275.37 while the highest value placed upon CSY Ltd.'s only asset in the BVI, that is to say, its leasehold land at Baughers Bay in Tortola including the buildings thereon and its marina facility was known to the boat owners, including Bigler, and also to Blether, CSY Ltd and JVO to be $725, 000. Blettner admitted in evidence that he alone knew from CSY Ltd.'s books that the then value was $721, 000. So it was clear that at 31 October 1983 CSY Ltd and JVO to be insolvent within the definition of insolvency stated by Ungoed-Thomas, J. in Mann v. Goldstein [1968] 2 ALL ER 769; Ch. D. at p. 778E, that is to say, it was unable to pay its debts as they fell due and there was a deficiency of assets as compare with liabilities. In addition, at that time JVO had already voluntarily placed himself under the protection of Chapter 11 of Bankruptcy laws in the USA to protect his personal assets from his creditors, and this was admittedly known to Blettner.
2.4 As of October 1983 it was common knowledge to all the parties in this action, including Blettner by his admission under cross-examination, that the so-called USA parent company of CSY Ltd, namely CSY Yacht Corp., had already been placed in the hands of a bankruptcy creditors committee to deal with insolvency; and that in the family of companies under the umbrella of CSY and under the direction of their founder JVO, operating in four places, namely, Honduras, St. Vincent, Florida and the BVI were in such financial difficulty that they were unable to pay their debts, but that the yacht charter and marina operation in the BVI by CSY Ltd were in much better condition, or rather a less...
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