Harrington v Smith et Al

• Jurisdiction: British Virgin Islands
• Court: High Court (British Virgin Islands)
• Judge: Bertrand, J.
• Judgment Date: 14 May 1990
• Neutral Citation: VG 1990 HC 1
• Docket Number: Civil Suit no. 74 of 1983
• Date: 14 May 1990

High Court

Bertrand, J.

Civil Suit no. 74 of 1983

Harrington

and

Smith et al

Appearances

Mr. Archibald Q.C. with Mrs. Creque for the plaintiff.

Mr. Webster with Mr. O'Neal for the defendant.

Company Law - Shares — Transfer — Transfer of shares by plaintiff to first defendant evidenced by instrument — Equitable title remained in plaintiff and prevailed over first defendant's claim — Fraudulent misrepresentation by first defendant to plaintiff — Judgment for plaintiff against first defendant for value of shares and damages for fraudulent misrepresentation.

Bertrand, J.

1 Before the hearing, counsel for the second defendant begged leave to withdraw from the matter, since there was no real issue involving the second defendant. The real issue being between the plaintiff and the first defendant. Learned Queen's Counsel for the plaintiff and learned counsel for the first defendant having no objection, the court granted leave to counsel for the second defendant to withdraw from the matter.

2 The third defendant was no longer a party to the matter.

3 Some minor amendments were made to the Statement of Claim and the endorsement on the Writ.

4 The first defendant came to the British Virgin Islands in 1966. During his stay here he owned shares in a company called the BVI Development Company Limited registered in the British Virgin Islands. This company owned two portions of land at Virgin Gorda comprising 130 acres. According to the plaintiff, it is 184 acres. These lands were leased from the Crown. Two houses were already built on the land. But in early 1978 when the First defendant went back to live in England he advertised the lands for sale in the States Gazette, a professional paper in the United Kingdom, at a price of $350,000 Sterling. That was in February, 1978. He had several replies, one of which came from a Mr. Norrington. The latter had a client who was interested in purchasing the land. This client was the plaintiff Harrington. Norrington introduced Harrington to the first defendant at the plaintiff's home on 8th February, 1978. Various valuations, plans and photographs of the site were produced. According to the first defendant the lands were put at a valuation in excess of $1. million by a Chartered Surveyor by the name of Walsh. To be precise he said $1,024,000.00. The lands were described to the plaintiff and discussions took place. According to Harrington, he came to the British Virgin Islands after the first meeting and visited the site in Virgin Gorda. He had introductory letters to various persons of note in the British Virgin Islands including George Mitchell of International Management and Trust Company (IMATCO) and McWelling Todman a Learned Queen's Counsel practising in the Territory. He met all of them. He then returned to the United Kingdom. According to the First defendant it was after their second meeting the plaintiff visited Virgin Gorda in the British Virgin Islands with introductory letters.

5 Be that as it may, the parties met twice again to formulate an agreement with respect to the lands. The evidence shows that neither of them was agreed initially upon what the terms of the oral agreement would be between them, except one, that is the formation of a new company called Turtle Bay Development Limited.

6 Finally, according to the plaintiff the terms agreed upon were as follows:

1

The defendant was to put in the lands at $250,000.00. 2. The plaintiff to provide $125,000.00 cash representing half the price of the lands. 3. The plaintiff to hold one share in BVI Development Company Limited. 4. The new company Turtle Bay Development Limited to hold the balance of the shares. 5. Two shareholders were to form the new company. 6. The plaintiff to hold 51% of the shares in the new company. 7. The defendant to hold 49% of the shares in the new company. 8. All profits arising from whatever source to be shared on a 50/50 basis notwithstanding the inequality of the shares.

7 The last three items the plaintiff said were suggested by the defendant, to which the plaintiff agreed. The defendant did not agree he was to put in the lands at $250,000.00 nor that the plaintiff was to put in $125,000.00 cash representing half. He insisted that the offer to the plaintiff was for him to buy the whole land for $500,000.00. But it is not clear in his evidence what he thought were the precise terms of the oral agreement between himself and the plaintiff. In his examination he said:

8 “Before actually forming the company on 30th May, 1978 two matters were agreed upon.

1. Plaintiff would purchase half the shares in the new company for $250,000.00 and

2. That the shareholding would be 50/50.”

9 According to the defendant, he eventually agreed to return to the British Virgin Islands at the request of the plaintiff,, retaining 50% of the shares of the company — Turtle Bay Development Limited.

10 The plaintiff said in cross-examination, that it was not the arrangement that the first defendant had to come to Virgin Gorda to live. He had to come there in August, 1978 “to help get things started”, since as the plaintiff said, “he was the one with local knowledge and business contacts.”

11 It is the evidence, however, that the defendant came to Virgin Gorda in August, 1978 and left again in September of the same year. The plaintiff said the defendant made periodic visits mainly to relieve him so that he could make return visits to his family in England. The plaintiff spent eighteen months in Virgin Gorda while the defendant was in England most of the time. The defendant further claimed in evidence, that later on, the plaintiff wanted him to hold 51% of the shares in the new company in return for the day to day control of the company, the plaintiff would be chairman and plaintiff's wife a director, the defendant having only one directorship. The defendant continued that the plaintiff –

“Further proposed that in that event the dividends of the company be paid on a 50/50 basis notwithstanding my ownership of the 51% of the shares. I told plaintiff I would agree to that if that's what he wanted.”

12 And the defendant left it at that. Nothing further was said. Although the defendant stated in evidence — “At no time did I ever agree that 51% of the shares should be held by the plaintiff,” he never told the court whether an agreement was arrived at regarding the proposal put to him by the plaintiff. This will be worthy of note when I come to deal with the minutes of the first meeting of Turtle Bay Development Limited. If the defendant never agreed to the plaintiff holding 51% and he 49% of the shares of the company, how then did the plaintiff come to hold 51% of the shares as told in the minutes — Exhibit “C5.” The defendant strenuously refuted Exhibit “C2” at paragraph 2, but it seems to lend support to the plaintiff's evidence regarding –

• 1. Cash provided by the plaintiff and

• 2. The shares of each shareholder.

13 All the arrangements for the formation of the new company came from the plaintiff to IMATCO Exhibit “C2” and this was acted upon by the Secretary. Exhibit “C3” dated 18th May, 1978. Paragraph 1 of Exhibit “C2” reads:

“…. am pleased to report that Tom and T have agreed to join forces in the development of the Sugar Mill Estate on Virgin Gorda. You will no doubt have heard from the ‘jungle drums’ to this effect by now anyway.”

14 Paragraph 2 reads:

“Basically the arrangement we have agreed is that Tom will put in the land at $250,000 and take $125,000 cash to be provided by me. Tom has magnanimously agreed that I should hold 51% of the shares of the new company so that we would never run into a deadlock situation. Future profits from the company would be shared 50/50. Both Tom and I would be directors and Eileen, Company Secretary. We are hoping that you will agree to do the auditing for us.”

15 “Sugar Mill” was the name of the property which the defendant had advertised for sale. Having only two shareholders in the new company there is no evidence that the defendant did not agree to the contents of Exhibit “C2”, even though the defendant said, he never saw this letter, until two days ago. I believe on a balance of probability he must have known of the arrangements stated in that letter. All these requests and propositions were before the formation of the company. Exhibit “C1” written as early as May 9th 1978 by Norrington, the man who introduced the plaintiff to the first defendant as a prospective buyer of the Sugar Mill Estate, very strongly supports the plaintiff's contention that he was to hold 51% of the shares in the new company ‘Turtle Bay Development Limited and that the share split to remain the same. I take this to mean 50/50.

16 There is no possible reason to disbelieve Exhibit “C1.”

17 The new company Turtle Bay Development Limited was incorporated on the 30th May, 1978 with two shareholders only, having one share each. The Certificate of Incorporation can be found in Exhibit “C35. “

18 The first meeting of the shareholders, took place on 2nd June, 1978 when the resignations of the Original Directors and Shareholders were accepted. Present were: M.E. Mitchell and T. Swain the Original Directors and Shareholders, Harrington, the plaintiff, his wife Eileen, Thomas Smith, the first defendant, and in attendance G.B. Mitchell of IMATCO. Director appointed at that meeting were F.R. Harrington, the plaintiff, E.M. Harrington, his wife, and T.G. Smith, the defendant. Minutes were taken and signed by G.M. Mitchell as Secretary and F.R. Harrington as Chairman. It had been decided at that meeting that these two men would act as Secretary and Chairman respectively — Exhibit “C4” and “C34” at page 134.

19 It was at the Directors' meeting held on that same day, but after the shareholders meeting, that Harrington, was appointed Chairman and his wife appointed Assistant Company Secretary. Let me now...