International Trading Holding Company Ltd v MED Trading Company Ltd
| Jurisdiction | British Virgin Islands |
| Judge | Wallbank, J. |
| Judgment Date | 19 December 2019 |
| Judgment citation (vLex) | [2019] ECSC J1219-4 |
| Court | High Court (British Virgin Islands) |
| Docket Number | CLAIM NO. BVIHCM 2019/0061 |
| Date | 19 December 2019 |
EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
COMMERCIAL DIVISION
CLAIM NO. BVIHCM 2019/0061
Mr. Ryan Hocking for the Claimants
Mr. John Carrington, QC for the Defendant
Wallbank, J. (Ag.): This is the decision in relation to an application for summary judgment pursuant to rule 15.2, Civil Procedure Rules 2000 (‘CPR’), and/or strike-out filed by the Claimants. For the reasons set out below, the application is dismissed. The Defendant shall have retrospective permission to file and serve an Amended Defence and Counterclaim, save that parts thereof purporting to plead a defence and counterclaim of estoppel are struck out.
For the purposes of this application and without making any findings of fact, I shall assume the following factual background. All three parties are companies incorporated in the Territory of the Virgin Islands (‘BVI’). The Second Claimant, Intraco U.A.E. Limited (‘Intraco’), was incorporated in 1998. Since 1989 Intraco has been trading in Dubai. Until mid-2001, a Mr. Trak was one of a number of shareholders in Intraco. A restructuring then took place. Basically, a company was interposed between the shareholders and Intraco. This was the First Claimant (‘ITHC’). ITHC became the majority shareholder in Intraco, holding 80% of Intraco's shares. A majority of those who had historically been shareholders in Intraco became shareholders in ITHC. Mr Trak came to hold his interest in ITHC through the Defendant (‘Med Trading’). Med Trading holds 25% of the shares in ITHC. Mr. Trak is the principal of Med Trading. Mr. Trak had been a director of Intraco and indeed its Managing Director until 2007, when he resigned in apparently acrimonious circumstances. So, in simple terms, the structure we are concerned with is as follows: Mr. Trak – Med Trading – ITHC – Intraco. Intraco has a branch registered in the United Arab Emirates (‘U.A.E.’) and a commercial license to trade there. It has assets and premises in Dubai. ITHC does not, but it did have a representative office license there between 2001 and 2014. In 2014 ITHC relinquished that license. Mr. Trak appears also to be based in Dubai.
Mr. Trak and Med Trading maintain that despite the corporate structure erected in 2001, Intraco adopted a practice of distributing profits directly to the shareholders of ITHC, Med Trading included, rather than paying these to ITHC and for ITHC then to distribute these to its shareholders.
Med Trading has brought legal proceedings against both the Claimants in Dubai. At risk of over-simplifying matters, there have been four such sets of legal proceedings. The first was begun in March 2013. The second in September 2016. The third and fourth in June 2017. The Claimants say only the third remains live. The subject matter of these proceedings, broadly stated, are claims that Med Trading is entitled to a share of profits from both ITHC and Intraco.
The first claim concerned an alleged share of profits for the period between 2005 and 2013. At first instance Med Trading obtained money judgments respectively against ITHC for about US$3.75million and against Intraco for about US$4.2million. Although ultimately the judgment was set aside as against Intraco on limitation grounds and as against ITHC on defective service grounds, the Claimants say that Dubai's highest court, the Court in Cassation, held in October 2018 that ITHC's shareholding in Intraco was sufficient to render Intraco liable to distribute profits directly to Med Trading. A close reading of an English version of the Court in Cassation's judgment indicates that it is an established principle of Dubai law that ‘a Defendant [such as Intraco] has a capacity [to be sued] when he is responsible directly or indirectly for the claimed right or shares responsibility for that right or the legal position required to be protected.’ (Emphasis and words supplied.) The Court in Cassation deferred to the lower court's findings of fact, which the Court in Cassation would not interfere with ‘as long as its [the lower court's] judgment is based on sound reasoning sourced on the papers and is sufficient to sustain the judgment in this concern.’ The Court in Cassation then ruled that the lower court's conclusion as to ‘capacity’ was ‘sufficient to sustain the judgment’.
The Court in Cassation was constituted by the Chief Justice of Dubai and four other judges. No reference is made to BVI law. Nothing in the Court in Cassation's judgment suggests that that court had failed to understand BVI law. The Court in Cassation was simply applying Dubai law principles. I note this, because the Claimants say they are inviting this Court to make a declaration that Med Trading has no cause of action against Intraco under BVI law ‘so that the Dubai Courts are not misled as to the state of BVI law into thinking that it is the same as Dubai law.’ There is no sign in the Court in Cassation's judgment on these points that the judges of that court had any such misapprehension.
The third set of proceedings, which the Claimants say is still alive, appear to be a further attempt by Med Trading to obtain judgment for a share of the profits. Intraco is defending these proceedings, but, say the Claimants, ITHC has decided not to participate in them. The Claimants allege that Mr. Trak is seeking deliberately to vex ITHC and Intraco and that he is likely to continue doing so unless an anti-suit injunction is made against his company Med Trading.
On 3 rd May 2018, that is, well after all four legal proceedings in Dubai had been commenced, the Articles of Association (‘Articles’) of ITHC were amended. This amendment was purportedly decided upon by way of resolutions of the directors and also of a majority of the shareholders. Med Trading did not sign the members' resolution. Med Trading says it was not consulted prior to the other shareholders signing it.
The earlier version of the Articles, passed in 2001, included a provision at article 142 stipulating that any differences between the company and any of its members were to be referred to arbitration. The place for any such arbitration was not stipulated and thus left open. The May 2018 amendment deleted that clause and inserted a more detailed provision as article 24. This provided, controversially for present purposes, that the place of arbitration would be the BVI.
In the Claimants' affidavit in support of this application, it is explained that amendment of the Articles was ‘thought to be necessary’ because the earlier Articles were ‘outdated’ and it was ‘necessary to amend them to reflect the fact that ITHC was no longer entitled to issue bearer shares’ and further, that the directors ‘considered that it was also in the best interests of the Company and its Shareholders that the dispute resolution provisions should be amended to bring them into line with the Arbitration Act 2013, to provide for the application of the rules of the BVI IAC.’
In their Statement of Claim the Claimants give a slightly different explanation. They say the amendment was made ‘to ensure, insofar as was possible, that disputes between ITHC and its shareholders as to inter alia the payment of dividends were dealt with by arbitration in the BVI, where BVI company law would be understood.’ This suggests that the Dubai courts have not ‘understood’ BVI law or are liable not to do so. It is not apparent to me that there has been any such misunderstanding of BVI law, because, so far as I can tell, the Dubai courts applied Dubai law. It also suggests that Dubai's courts and judges, including their Chief Justice and the four other judges who comprised the Court in Cassation, were and are incapable of understanding BVI law. That is a suggestion which does not commend itself.
Counsel for the Claimants submitted at the hearing that the amendment ‘simply adds procedural clarity.’ Med Trading says the addition of a stipulation for the place of arbitration does more than this. In this regard Med Trading is clearly right. I will return to this.
Med Trading alleges further that the amendment was made by ITHC's directors and other members deliberately to target Med Trading, to force Med Trading away from the Dubai courts and to force disputes between Med Trading, ITHC and Intraco to be arbitrated in the BVI.
On 26 th April 2019 the Claimants filed a Claim Form and Statement of Claim. By way of relief the Claimants seek
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(1) a declaration in favour of ITHC that the arbitration provision in its 2018 amended Articles is binding upon Med Trading;
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(2) an interim and/or final injunction restraining Med Trading from commencing or pursuing any further claims or proceedings against ITHC other than by arbitration in the BVI;
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(3) a declaration that Med Trading is not a shareholder of Intraco and that Med Trading has no right or entitlement to receive dividends from Intraco; and
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(4) an interim and/or final injunction restraining Med Trading from commencing or pursuing any further claims or proceedings against ITHC whether in the U.A.E. or elsewhere inconsistent with such declaration;
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(5) costs.
The Claimants plead the existence of the earlier arbitration provision at article 142 of ITHC's Articles prior to their amendment. The Claimants do so by way of background. The Claimants do not include relief in their prayer that Med Trading would be caught by the original provision if the new provision at article 24 does not apply. The Claimants' prayer is very specific and delimited. It does not include a “catch-all” prayer, commonly deployed, to seek such other relief the Court deems fit. The absence of a prayer linked to article 142 merits observation because the Claimants argue in their current application that Med...
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