Chemtrade Ltd Appellant v [1] Fuchs Oil Middle East Ltd [2] Fuchs Petrolub AG Respondents

JurisdictionBritish Virgin Islands
JudgeMitchell JA [AG],Justice of Appeal [Ag.],Justice of Appeal,Don Mitchell,Louise E. Blenman,Mario Michel
Judgment Date18 September 2013
Judgment citation (vLex)[2013] ECSC J0918-4
CourtCourt of Appeal (British Virgin Islands)
Docket NumberBVIHCVAP2013/0004
Date18 September 2013
[2013] ECSC J0918-4




The Hon. Mde. Louise E. Blenman Justice of Appeal

The Hon. Mr. Mario Michel Justice of Appeal

The Hon. Mr. Don Mitchell Justice of Appeal [Ag.]


(On appeal from the Commercial Division)

Chemtrade Limited
[1] Fuchs Oil Middle East Limited
[2] Fuchs Petrolub AG

Mr. Victor Joffe, QC, Mr. Lynton Tucker, Mr. James Brightwell, and Ms. Colleen Farrington of Harneys, for the Appellant

Mr. George Bompas, QC, Mr. Adam Holliman, and Mr. Jerry Samuel of Conyers Dill & Pearman, for the 2 nd Respondent

Civil appeal — Commercial law — Unfair prejudice — BVI Business Companies Act, 2004 as amended — Whether the learned judge correctly exercised his discretion in ordering that the company's articles of association be amended — Business Administration Order — Whether Purchase Order was more appropriate remedy

Chemtrade Limited ("Chemtrade") and Fuchs Petrolub AG ("Fuchs") are equal shareholders in Fuchs Oil Middle East Limited ("FOMEL"), a BVI company, and a part of the Alhamrani Group of companies in Saudi Arabia. Chemtrade and Fuchs each provided two directors to FOMEL's board. The ownership of Chemtrade was in dispute between Sheikh Abdullah and his brothers ("the Brothers"). 1 Two of the Brothers, Sheikhs Mohamed and Siraj, were the directors of FOMEL. Due to the dispute over the ownership of Chemtrade, they were never replaced. Sheikhs Mohamed and Siraj initially informed Fuchs that they had sold Chemtrade to Sheikh Abdullah and that they were no longer the Chemtrade directors on the board of FOMEL. Then, after a year, when Sheikh Abdullah had gone into possession of FOMEL and all the other Alhamrani Group of companies, Sheikhs Mohamed and Siraj began to claim that they had not sold Chemtrade to Sheikh Abdullah.

Sheikh Abdullah's plant and Group structure in Saudi Arabia provided all the logistical and administrative support required by FOMEL, so that while it would not have been impossible, it would have been very difficult and expensive to separate FOMEL from the Alhamrani Group which Sheikh Abdullah headed. Sheikh Abdullah put pressure on Fuchs not to cooperate with the Brothers, but to continue cooperating with him. He promised to compensate Fuchs if they should be subject to any court order to pay damages as a result of the Brothers succeeding in their claim to the ownership of Chemtrade. Because the articles of FOMEL provided that a board meeting was not quorate unless at least one of the directors nominated by either of Fuchs or Chemtrade was present, it was only necessary for Fuchs to decline to attend any board meeting called by Chemtrade to frustrate their effort to become involved. For a year, the Fuchs directors refused to meet with Sheikhs Mohamed and Siraj or to permit them to participate in the management of FOMEL. Sheikhs Mohamed and Siraj acting in the name of Chemtrade brought unfair prejudice proceedings against Fuchs for their exclusion from the board.

In the Commercial Court, the judge tried the ownership case brought by Sheikh Abdullah against the Brothers ("the Ownership Case") and the Unfair Prejudice Proceedings brought by Chemtrade against Fuchs at the same time. The judge held in the Ownership Case that the Brothers had not sold Chemtrade to Sheikh Abdullah. He held in the Unfair Prejudice Proceedings that Fuchs had made the wrong call in going along with Sheikh Abdullah, and that their exclusion of the Brothers from the board and the management of FOMEL amounted to unfair prejudice. He declined to order Fuchs to purchase the Chemtrade shares as urged by Chemtrade, or to make a winding up order as sought by Fuchs.

The remedy he selected was to order FOMEL's articles to be amended so that it was no longer necessary for both shareholders to be present for there to be a quorum. He continued the right of Chemtrade to appoint the chairman, so that if the Fuchs directors refused to attend a board meeting of FOMEL any decision taken would still be valid. Chemtrade appealed seeking the remedy of a Purchase Order rather than the Business Administration Order the judge had made. Fuchs cross appealed for the order of the judge to be upheld on additional grounds.

Held: dismissing both the appeal and cross-appeal and making no order as to costs, that:

1. Section 184I of the BVI Business Companies Act, 20042 gives the judge a discretion to make such order as he considers just and equitable, including, without limiting the generality, one of several orders which the section lists, the remedy of amending the articles being one of the possible orders listed.

2. The Business Administration Order that the judge determined was the most appropriate one in the circumstances was one of the reliefs sought by the appellant in its claim, and though the appellant would have preferred him to make a Purchase Order by which Fuchs would buy out Chemtrade it was open to the trial judge to consider the matter in the round and to make the order he felt was just and equitable.

3. The trial judge had an unlimited discretion to make such order as he thought fit with a view to bringing an end to the matters complained of, and it had not been shown that the decision had been clearly or blatantly wrong or that his discretion has been exercised erroneously.

Ebrahimi v Westbourne Galleries Ltd. and Others [1973] AC 360 distinguished; Dufour and Others v Helenair Corporation and Others (1996) 52 WIR 188 applied.

4. In view of the fact that in the Ownership Case this court has, in a decision delivered immediately prior to this one, determined that the Brothers are not the owners of Chemtrade, but that they had in fact sold Chemtrade to Sheikh Abdullah, it would have been particularly unfortunate if the judge had ordered Fuchs in effect to buy out the Brothers' interest in Chemtrade. The proper order for this court to make would be to leave intact the Business Administration Order made by the court below, leaving it for Sheikh Abdullah and Fuchs to sort out between themselves the future arrangements for the management of FOMEL according to the agreements made between themselves.

Mitchell JA [AG]

The facts as found by the learned trial judge in this case are not in dispute. The sole area of dispute raised by the appellant Chemtrade Limited ("Chemtrade") is the remedy he selected in his judgment delivered on 21 st December 2012. Fuchs Petrolub AG ("Fuchs") has filed a cross-appeal asking this

court to uphold the judgment of the learned trial judge on various additional grounds.
Chemtrade and FOMEL

The background facts are set out in the judgment of this court in the dispute over the ownership of Chemtrade ("the Ownership Case")3 delivered immediately prior to this judgment. Chemtrade is one of the companies in the industrial conglomerate of the late Sheikh Ali Mohamed Alhamrani of the Kingdom of Saudi Arabia ("KSA"). The remaining relevant facts are taken from the judgment of the learned trial judge in the court below.


Chemtrade is a BVI company. It was incorporated in the Virgin Islands under the BVI Business Companies Act, 20044 ("the BCA"), for the special purpose of holding the 50% shareholding of the Alhamrani Group in the company known as Fuchs Oil Middle East Limited ("FOMEL"). FOMEL was also incorporated in the Virgin Islands under the BCA. The other partner in FOMEL is the second respondent Fuchs Petrolub AG ("Fuchs"), a German registered company. FOMEL is thus a joint venture company. Its purpose is to sell Fuchs branded products outside of the Kingdom of Saudi Arabia. FOMEL's product was originally entirely sourced from Alhamrani Fuchs Petroleum Saudi Arabia ("AFPSA"), another company in the Alhamrani Group. AFPSA is itself a joint venture company held between the Alhamrani Group holding 68% and Fuchs holding the remaining 32%. The purpose of AFPSA is to sell Fuchs licensed products within the Kingdom of Saudi Arabia.


FOMEL's Memorandum of Association provides for two classes of shares, Class A and Class B shares. Chemtrade holds all the A shares through two Alhamrani Group companies, AUC and AIG. Fuchs holds all the B shares. Each class of

shareholders has the right to appoint two directors to the board. FOMEL's Articles of Association provide that the board shall consist of four members and that the board shall not be quorate unless one director from each class is present. FOMEL's board consists of two directors appointed by Fuchs ("the Class B Directors") and two directors appointed by Chemtrade ("the Class A Directors"). At all material times, the Class B Directors have been Mr. Alf Untersteller and Mr. Stefan Fuchs. The Class A Directors are Sheikhs Mohamed and Siraj. If a vote of the directors results in a tie, the chairman has a casting vote. It was common ground that to the date of this dispute the casting vote had never been used and there had been an understanding that all matters would be dealt with by mutual agreement.

Sheikh Mohamed has at all material times been, and remains, the chairman. Accordingly the directors of FOMEL appointed by Chemtrade controlled the chairmanship of FOMEL. Since a quorum required one of each class of directors to be present at a Board meeting, each class could prevent a meeting from taking place by mere non-attendance.

The Board of Grievances

Sheikh Mohamed and the Brothers 5 on the one side, and Sheikh Abdullah and the sisters on the other, fell into a family dispute over the assets of Sheikh Ali Mohamed at the end of 1999. This dispute, as has been detailed in the judgment in the Ownership Case, was resolved by a Sharia law process of 'takharuj' mediated in February 2008 by the Saudi court known as the 'Board of Grievances'. Takharuj in this case involved Sheikh Mohamed and the Brothers valuing the jointly held assets of the Alhamrani Group and...

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