Brantley Inc. v Antarctica Asset Management Ltd

• Jurisdiction: British Virgin Islands
• Judge: HARIPRASHAD-CHARLES J
• Judgment Date: 09 May 2008
• Docket Number: Claim No. BVIHCV2007/0227
• Court: High Court (British Virgin Islands)
• Date: 09 May 2008

THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE (CIVIL)

Before: Her Ladyship Justice Indra Hariprashad-Charles

Claim No. BVIHCV2007/0227

BETWEEN

Brantley Inc.

Applicant/Claimant

and

Antarctica Asset Management Ltd.

Respondent/Defendant

Appearances:

Mr Christopher Young of Harney Westwood and Riegels for the Applicant/Claimant

Mr Jack Husbands and Ms Annabel Gillham of Walkers for the Respondent/Defendant

Cases referred to and considered in the judgment

Swain v Hillman and another [2001] 1 All ER 91

Boston Life and Annuity Company Limited v Dijon Holdings Limited BVIHCV2006/0070, Judgment delivered on 14 May 2007 [unreported]

WB Nominees Limited and Others v Blue Ribbon Assets Limited BVIHCV 2002/0154 and BVIHCV 2004/ 0030–Judgment delivered on 31 August 2004 [unreported]

ED & F Man Liquid Products Ltd v Patel and Another [2003] EWCA Civil 472

Pentium (BVI) Limited and Landcleve Corporation v The Bank of Bermuda Limited BVIHCV 2002/0122–Judgment delivered on 30 April 2003 [unreported]

Royal Bank of Canada v Helenair Caribbean Limited St Lucia High Court Civil Claim No. 654 of 2001–Judgment delivered on 23 September 2002 [unreported]

Vivay Kirtlal Mehta v Rajesh Kishor Mehta , BVIHCV2006/0177 and BVIHCV2006/0178–Judgment delivered on 10 November 2006 [unreported]

Charles Savarin v John William (1995) 51 WIR 75

Universal Caribbean Establishment v James Harrison Court of Appeal No. 21 of 1993 (Antgua and Barbuda)

Bank of Bermuda Limited v Pentium (BVI) Limited and Landcleve Limited BVI Civil Appeal No. 14 of 2003–Judgment delivered on 20 September 2004.

CATCHWORDS:

Statutory Interpretation — Sections 176 and 179 of the Business Companies Act considered — Whether redemption is complete when the member receives the notice or at the time when the shares have been acquired through agreement as to fair value or following an appraisal of their fair value — When should the appraisal process in section 179 (9) commence — Does the appraisal process ceases to exist if it is not completed during the time stipulated in the section — Does the Court has an inherent jurisdiction in cases where there is noncompliance of subsections 179 (8) and (9).

HEADNOTE:

Brantley is a company organized under the laws of the Republic of Panama. Antarctica Asset Management Ltd. (‘AAM’) was incorporated as an International Business Company and reregistered under the Business Companies Act (‘the Act’) on 1 March 2006. AAM is the fund manager and investment advisor of Antarctica Market Neutral Fund Limited which is a fund of hedge funds organized in the BVI as an open-end investment company.

Brantley was at all material times the owner of 78,615 Class B non-voting participating shares in AAM. On 29 March 2007, AAM wrote to Brantley indicating that it had received instructions from 100% of its holders of the outstanding Class A shares and 90% or more of its holders of the outstanding Class B shares in AAM requesting it to redeem its Class B shares as of the date hereof. AAM stated that the fair value of the share is US$6 per share.

On 11 April 2007, Brantley responded through its US Counsel. They disagreed with the valuation of $6 per share, referred to section 179 of the Act and suggested that a meeting be held to discuss the issue. Brantley did not receive any substantive response until 10 May 2007 when AAM wrote contending that US$6 was a fair value and that the valuation was fair. It also stated that Brantley's shares were redeemed on 29 March 2007 and as such, Brantley is no longer a shareholder.

Several letters passed between the legal practitioners of Brantley and AAM in respect of fair value of the shares. On 19 June 2007, Brantley indicated to AAM that a joint appraiser of its choice should be engaged to conduct an appraisal, with AAM supplying such information as may reasonably be required to the appraiser and both parties being bound by its findings. AAM did not accept that proposal. Subsequently, the parties began accusing each other of delaying the appraisal process at which point, AAM contended that the appraisal process was no longer applicable and that Brantley's right to utilize that process had expired on 18 May 2007.

On 13 August 2007, Brantley rejected the assertion that it had waived or lost any rights under section 179 of the Act. It also advised AAM that it had appointed Navigant as its appraiser and asked for AAM's appraiser. Brantley did not get a satisfactory response. As a result, on 9 October 2007, Brantley instituted these proceedings by way of a Claim Form as well as by an application. It applied for summary judgment for the relief set out in paragraph 1 of the Claim Form pursuant to CPR 15 which essentially is a declaration that the redemption of the shares has not been completed.

HELD:

• 1. Section 176 makes it mandatory that a company, on receiving written instructions from the requisite majority of members of the company entitled to vote shall redeem the shares of a minority shareholder.

• 2. The issuance of notice to the member does not complete the redemption but merely commences it, as in the notice, the company is obligated to state the redemption price and the manner to be followed in redeeming the shares. The section also speaks to ‘each member whose shares are to be redeemed’. The Legislature did not use the term ‘each member whose shares ‘were’ or ‘are redeemed’. Thus, the words used in section 176(3) connote that the redemption is to be done in the future and not on the date of the service of the notice.

• 3. The Legislature did not use ‘former member’ in section 179. The words used are ‘member’ and ‘dissenting member. If the Legislature intended that on the receipt of the notice without more, redemption is complete and the minority shareholder is now a former member, then it would have clearly used the words ‘former member’ instead of ‘member’ and ‘dissenting member’. The ineluctable conclusion seems to be that the Legislature intended that the shareholder, whose shares are being compulsorily redeemed, is still a member until the redemption process stipulated in section 179 is complete.

• 4. The redemption process is not completed until the fair value for the shares has been agreed or determined by the appraisal procedure as the concluding words of both sections 179(8) and 179(9) make it clear that the company shall pay the member and the member surrenders the share certificate.

• 5. If the shares are not considered redeemed during the redemption process then the company cannot re-issue those shares. The company can only re-issue the shares after the redemption process is completed; not on the date of receipt of the notice.

• 6. Section 179(11) seem to limit or restrict the rights of a dissenting member as it only has the right to the procedures outlined in section 179 and the right to institute proceedings on the ground that the action of the company is illegal. The dissenting member cannot enforce any other right that he would have been entitled to if the redemption process had not started.

• 7. The shares could not have been redeemed on 29 March 2007. AAM's letter can only be considered in light of section 176 as the written notice that AAM is required to give to Brantley that its shares are to be redeemed. This then triggers the procedure in section 179 and until the appraisers have fixed a fair value for the shares, AAM has paid Brantley for them and Brantley surrenders its share certificate, the redemption of the shares is not complete and Brantley is still a member with residual rights.

• 8. During the first 30 days period in section 179 (8), the appraisal process provided for in section 179 (9) will not apply. The section was crafted so as to ensure that the redemption of shares would be completed as soon as practicable while ensuring that the process is fair. The drafters gave the parties some time to negotiate and decide on the fair value of the shares to be redeemed. However, it limits the time for negotiation to only 30 days not to 50 days. During the additional 20 days, the appraisal process must commence and be completed.

• 9. In cases where the time for the appraisal process had expired before an appraiser was appointed due to, for example, failed attempted negotiations by the parties, the Court would have an inherent jurisdiction to deal justly and fairly with matters of such nature. If that were not the case, then a party may suffer irreparable loss.

• 10. The relief sought in paragraph 1 of the Claim Form is purely a question of law. There are no issues, either factual or legal that will necessitate a trial. The construction of sections 176 and 179 is purely a legal issue and does not necessitate a trial as it could be dealt with summarily. AAM has no real prospect of successfully defending the claim and is therefore, entitled to obtain summary judgment on this issue with costs.

Introductory

HARIPRASHAD-CHARLES J

1 On 16 November 2007, this Court made the following order namely:

• 1. Paragraph 2 of the Amended Statement of Claim and paragraph 2 of the Defence be amended by the substitution therein of 78,615 for 62,893;

• 2. The Defendant has designated Deloitte & Touche to be an appraiser pursuant to section 179(9) (a) of the BVI Business Companies Act, 2004 as amended (‘the Act’);

• 3. Navigant Capital Advisors LLC and Deloitte & Touche shall by 10 December 2007 designate a third appraiser pursuant to section 179 (9)(b) of the Act;

• 4. The parties and the appraisers shall comply with sections 179(9)(c) and (d) of the Act;

• 5. Judgment be reserved in respect of paragraph 1 of the Application;

• 6. There be liberty to the parties and to the appraisers to apply;

• 7. Costs be reserved.

2 This judgment focuses on the sole remaining issue which is contained in paragraph 1 of the Notice of Application filed on 9 October...