Colony Credicom L.P. v Colorado Credicom Appellants Credicom N v Contributor Respondent

• Jurisdiction: British Virgin Islands
• Court: Court of Appeal (British Virgin Islands)
• Judge: REDHEAD J.A,Justice of Appeal,Chief Justice,Dennis Byron,Satrohan Singh
• Judgment Date: 06 December 1999
• Judgment citation (vLex): [1999] ECSC J1206-1
• Docket Number: CIVIL APPEAL NO. 4 OF 1999
• Date: 06 December 1999

[1999] ECSC J1206-1

IN THE COURT OF APPEAL

Before:

The Hon. C.M. Dennis Byron Chief Justice

The Hon. Satrohan Singh Justice of Appeal

The Hon. Albert Redhead Justice of Appeal

CIVIL APPEAL NO. 4 OF 1999

Between:

Colony Credicom L.P.

and

Colorado Credicom

Appellants

and

Credicom N V Contributor

Respondent

Appearances:

Mr. Joseph Archibald, Q.C. for the Appellants

Mr. Paul Webster with him

Mr. Gerard Farara, Q.C. for the Respondent

Miss T. Small with him

REDHEAD J.A

1 This is an appeal from a decision of Moore J. in which he granted an indefinite stay order of a petition brought by the appellants for a compulsory winding-up order of Credicom Asia Limited [hereinafter called the Company] incorporated pursuant to the provisions of the International Business Companies Act Chapter 291 of the British Virgin Islands.

2 The Company is a holding company whose only assets are shares in subsidiaries, including three British Virgin Islands Corporations which currently own direct and indirect interests in four groups of assets.

3 The Company owns a 91.91 controlling interest in Argent Holdings Limited. Argent is a British Virgin Islands Company and Argent's controlling interest in Silverlink Holding Limited which is another British Virgin Islands Company in turn owns and operates a chain of luxury hotels, commonly known as Amanresorts

4 The Company owns 100% of the shares in La hotel corporation, another British Virgin Islands Company that owns and operates L'Ermitage Hotel in Beverly Hills, California.

5 The appellants are shareholders in the Company. The respondent, Credicom NV, (NV) a Belgian Company with its main office in Paris France is the other shareholder of the Company.

6 The company is indebted to the amount exceeding US$190 million of that amount the appellants loaned the Company US$18 million to the company pursuant to a promissory note on 30 ^th December, 1997.

7 This loan together with US$4million was due and payable by the company on 31 ^st March, 1998. The Company has failed to pay the Promissory note at maturity. The full amount of US $22 million plus interest remains outstanding.

8 The Company did not file a Notice of Opposition to the Petition neither was it represented in the court below nor in this court.

9 The only opposition to the petition came from the respondent NV which is the other shareholder of the Company and which is said to be controlled by Clement Vaturi a resident of Paris and Chairman of the Company, Credicom Asia.

10 It is the appellants' case as I have said above that the Company is indebted to the appellants in an amount exceeding US$190 million which is overdue and unpaid. Both the appellants and the respondent acknowledge that the indebtedness cannot be paid unless the assets of the company are liquidated, but according to the appellants they are unable to agree how this should be done.

11 As a result of that deadlock and the absence of mutual trust and confidence between the appellants and NV, the ability of Credicom Asia, the Company and the subsidiaries to function and to make appropriate and necessary business decision has ceased and the assets of the Company are at risk.

12 In response to the appellants' petition for compulsory winding-up of the Company the respondent filed a Notice of Motion to dismiss the petition on the grounds that:

• (1) that the Petitioners and Credicom NV, Credicom Asia Limited and others agreed and contracted in writing that any dispute which may occur in connection with Credicom Asia Limited, including a dispute as to whether a liquidation of Credicom Asia Limited was appropriate or required or to be effected, would be resolved within the specific terms of the contract document which expressly provided for discussions/negotiations between the parties, contractually provided for mediation and failing that, under the laws of the state of New York and under the exclusive jurisdiction of the courts of the State of New York. It is not open to or permissible, it alleged for the petitioners to commence compulsory liquidation proceedings before the British Virgin Islands High Court.

• (2) the winding-up petition brought by the Petitioners is contrary to and in violation of the express contractual terms agreed upon by the parties as to the resolution of dispute, including disputes as to liquidation of Credicom

• (3) further or in the alternative, the British Virgin Islands is not the forum conveniens for the bringing of proceedings for the liquidation of Credicom Asia Limited.

• (4) further or in the alternative, the winding-up petition is an abuse of the process of this court.

• (5) damages

• (6) further or other relief.

13 The learned trial judge did not grant the appellants' application for winding-up of the Company neither did he dismiss the application on the respondent's motion but rather he granted a stay holding that the contract documents in the instant case contain a New York choice of law clause where exclusive jurisdiction was granted to the courts of New York.

14 That factor alone, according to the learned trial judge and based upon authorities entitled him in the exercise of his judicial discretion to grant a stay.

15 The appellants are dissatisfied with this decision and have appealed to this court.

16 The appellants, in their Amended Notice of Appeal, file nine [9] grounds of Appeal. To encapsulate the appellants' grounds of appeal, the appellants are complaining that:

"1. The learned trial judge failed to address the appellants' fundamental argument that the New York jurisdiction clause question is narrowly limited to the "interpretation or enforcement" of the private contracts and does not, by its terms, even purport to apply to a compulsory statutory winding up brought on statutory grounds under the Companies Act.

2. The learned trial judge failed to address, or misapplied, the legal authorities that establish the filing up of a winding-up action does not, in law, constitute the enforcement of contractual rights.

3. The learned trial judge failed to appreciate, or give any weight to the fact that the appellants were seeking to enforce statutory rights under the Companies Act and not contractual rights.

4. The learned trial judge failed to consider or give proper weight to, the fact that Credicom Asia, the very company against whom the stay was sought did not oppose the petition.

5. The learned trial judge failed to consider and give effect to the rule of law that NV bears the burden of proof to establish that the New York jurisdiction clause applies to a compulsory statutory winding-up brought on statutory grounds under the Companies Act and failed to find, on the evidence, that NV had not discharged that burden."

17 Learned Senior Counsel, Mr. Farara argued that the parties in the summary of terms of 30 ^th December, by clauses 7(e), 8(a), (c) & (d) had provided for liquidation and by providing for voluntary liquidation, by implication they had expressly waived judicial liquidation. (my emphasis).

18 I have difficulty with that argument because in my view it is a contradiction in terms to say that one impliedly did something expressly because to my mind this is what this submission is saying.

19 In fact there was this summary of terms of the bridge loan from the two appellants to the respondent, Credicom Asia in the sum of US$18 million and which the defendant promised to repay US$22 million in 90 days i.e. by 31 ^st March, 1998.

20 This loan was advanced to Credicom Asia in anticipation of the sale by the defendant of its hotel assets.

21 This agreement is a lengthy one. However, I shall refer briefly to the clauses on which Mr. Farara, Queen's Counsel, relies for a waiver by the appellants not to insist on judicial liquidation:

"7(e) Credicom Asia will (I) cause the proceeds of the sale of Silverlink to be treated as a liquidation distribution from Argent………..""

8(a) ……Provided, however, that in a combination sale, NV shall not have the right to match the terms if the price of all three assets is at least equal to US$139,750,000. Pursuant to the foregoing, Colony Colorado will proceed with an orderly and professional liquidation (in the form of sales), refinancing or other disposals of the Hotel subsidiaries (or their assets) within a period of six months of the final maturity date (the "Liquidation period")…………….."

"8(b) the proceeds from the liquidation of the Hotel subsidiaries and any other repayment of the IMFIN loan and any other funds will be applied first to pay off the c/c loan…………"

"8(c) If (A) the Hotel subsidiaries are not substantially liquidated by the close of liquidation Period or (B) the proceeds of the liquidation of the hotel subsidiaries and/or the proceeds from the repayment of the Imfin loan and/or any other funds provided by NV are insufficient to pay Colony/Colorado (i) the c/c loan, (ii) the previously unreinbursed expenses of Colony/Colorado.

……… Colony/ Colorado shall have the option to put to Credicom Asia their shares of Credicom Asia and their limited partnership interests in Kislev for a price (the "Put Price")…………. The exercise of such put shall be effective by Colony/Colorado giving written notice (the "Put Notice") to Credicom Asia within 30 days of the earlier of the closing of the liquidation period………"

"8(d) If Credicom Asia fails to purchase from Colony\Colorado their shares of Credicom Asia and their limited partnership interest in kislev upon the exercise of the put as provided in paragraph 8.c, during the period set forth therein, (i) the Board of Directors and the shareholders of Credicom Asia shall resolve to place Credicom Asia into liquidation."

22 Article 11 provides for the a memorandum of the stockholders agreement and the Article of Association for the priority liquidation rights of Colony Colorado as contained in the summary...