Ennio Zanotti v Interlog Finance Corporation and Others

• Jurisdiction: British Virgin Islands
• Judge: Bannister J [ag]
• Judgment Date: 08 February 2010
• Court: High Court (British Virgin Islands)
• Docket Number: CLAIM NO: BVIHCV 2009/0394
• Date: 08 February 2010

EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE COMMERCIAL DIVISION

CLAIM NO: BVIHCV 2009/0394

BETWEEN

Ennio Zanotti

Claimant

and

(1) Interlog Finance Corp

(2) Enzo Zanotti

(3) Nautilus Fiduciary Services Limited (a company incorporated under the laws of Jersey)

Defendant

Appearances:

Mrs Hazelann Hannaway-Boreland for the First Defendant/Applicant

Mr Robert Foote for the Claimant/Respondent

(Claim under section 1841 Business Companies Act 2004 — company made defendant to claim — articles of association containing arbitration agreement — whether domestic or non-domestic agreement — construction of article — whether arbitration agreement purporting to stay claim brought under section 1841 null and void)

JUDGMENT IN CHAMBERS

Bannister J [ag]

1 This is an application under section 6 of the Arbitration Ordinance (CAP 6) (“the Ordinance”) by the first Defendant company (“the Company”) to stay (as against the Company) proceedings brought against it (and others) for relief under section 1841 of the Business Companies Act, 2004 (“the BCA”).

2 The Company was incorporated in November 1995 under the International Business Companies Act 1984. Its original members were Ennio Zanotti (“the Claimant”) and his brother Enzo (“thesecond Defendant”). In the statement of claim the Claimant alleges a business relationship between the two brothers going back to 1971. In 1977 they formed a Panamanian company, ES-KO International Inc (“ES-KO”), for the purpose of providing logistical support services to international organizations and others on the basis that its profits were split between them equally, with the Claimant undertaking its day to day management but with all major strategic decisions being taken jointly. In 1995 it was decided to incorporate the Company in the BVI for the purpose of holding the shares in ES-KO, which were, it is alleged, subsequently transferred into the ownership of the Company. The directors of the Company were the Claimant, who was executive Vice-President, Secretary and Treasurer; the second Defendant, who was President; and one Franco Zanotti, who is the son of the second Defendant. The Claimant alleges that he and the second Defendant each held one half of the issued non-voting shares in the capital of the Company and that all of the voting shares were issued to the second Defendant. The statement of claim pleads that the relationship between the members was one of trust and confidence; that the Claimant was to remain on the board of the Company and have day to day management of its business; that all major decisions would be taken jointly; and that profits would continue to be distributed equally.

3 In 2003 the second Defendant transferred his shares in the Company to Sefta Trustees Limited.

4 The statement of claim goes on to allege that the relationship of trust and confidence has broken down. I do not need to repeat all the allegations here, but it is pleaded that on 20 February 2008 the second Defendant (who was then no longer a member of the Company) caused a members' resolution to be passed removing the Claimant from the board and that on the following day the remaining members of the board removed him from the posts of executive Vice-President, Treasurer and Secretary. On the same day, Sefta Trustees Limited transferred the shares originally held by the second Defendant to the third Defendant as trustee of an English settlement of which the second Defendant is alleged to be the sole beneficiary.

5 The statement of claim goes on to plead that on 1 October 2009 the Company wrote to the Claimant and to the third Defendant telling them that the number of authorised non-voting shares had been increased from 42,000 to 82,000 and that the board had decided to make an offer to each of the Claimant and the third Defendant of up to 19,748 of the new shares at a price of US$379.79 per share, such offer to remain open for acceptance until 2 November 2009 and beingconditional upon payment being made in full by 2 December 2009. Although the pleading is not entirely clear, it appears to be being said that if one of the two shareholders did not buy any shares under these terms, but the other did, that other could buy the shares which the non-subscribing member had originally been offered. The Claimant did not, it appears, accept the offer within the time stipulated. He pleads that his request for information upon which he might be able to evaluate its terms was rejected by the Company and alleges that that refusal, coupled with the tightness of the deadlines for acceptance and payment, were part of a scheme to dilute his holding.

6 On 12 November 2009, the Claimant issued his claim form and served it on the Company. The other Defendants have yet to be served. The relief claimed was for a declaration that the affairs of the Company have been conducted in a manner unfairly prejudicial to the Claimant; that one (or more) of the three Defendants should buy out the Claimant; alternatively, that the resolutions removing him as a director, etc, of the Company be set aside and that he be reinstated; that the Company's records be rectified to expunge therefrom certain unspecified false allegations contained in the resolutions of 20 and 21 February 2008; requiring the Company or the second Defendant to “compensate” the Claimant (for what, precisely, is not specified) and to account for all payments into or out of the Company's bank account since it was opened. This relief is claimed, as I have said, under section 1841 of the BCA.

7 An acknowledgement of service was filed on 18 November 2009. On 7 December 2009 the Company applied to have the claims against it struck out or dismissed, alternatively stayed. The application notice also asks that service of the claim form and particulars of claim be set aside as against the Company. It is clear that there are no grounds upon which the Company could have the claims struck out or dismissed and there is no material on the basis of which it could be held that service on the Company was bad. The application was argued simply as a stay application under section 6 of the Ordinance.

8 Section 6 is in play because Articles 143 and 144 of the Company's Articles of Association are in the following terms:

“ARBITRATION

• 143. Whenever any difference arises between the Company on the one hand and any of the members or their executors, administrators or assignees on the other hand, touching the true intent and construction or the incidence or consequences of theseArticles or of the Act, touching anything done or executed, omitted or suffered in pursuance of the Act or touching any breach or alleged breach or otherwise relating to the premises or to these Articles, or to any Act or Ordinance affecting the Company or to any of the affairs of the Company such difference shall, unless the parties agree to refer the same to a single arbitrator, be referred to 2 arbitrators one to be chosen by each of the parties to the difference and the arbitrators shall before entering on the reference appoint an umpire.

• 144. If either party to the reference makes default in appointing an arbitrator either originally or by way of substitution (in the event that an appointed arbitrator shall die, be incapable of acting or refuse to act) for 10 days after the other party has given him notice to appoint the same, such other party may appoint an arbitrator to act in the place of the arbitrator of the defaulting party.”

The Company claims to have initiated the arbitration process, but the Claimant is refusing to participate.

9 Section 6 of the Ordinance provides as follows:

“Staying court proceedings where there is submission to arbitration

• 6(1) If any party to a domestic arbitration agreement, or any person claiming through or under him commences any legal proceedings in any court against any bother party to the agreement, or any person claiming through or under him in respect of any matter agreed to be referred, any party to those legal proceedings may at any time after appearance before delivering any pleadings or taking any other steps in the proceedings, apply to that court to stay the proceedings, and that court, if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the agreement, and that the applicant, was, at the time when the proceedings were commenced and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, may make an order staying the proceedings.

• (2) 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...