Kwok Kin Kwok v Crown Treasure Group Ltd

• Jurisdiction: British Virgin Islands
• Judge: Gonsalves JA
• Judgment Date: 14 March 2019
• Judgment citation (vLex): [2019] ECSC J0314-2
• Court: Court of Appeal (British Virgin Islands)
• Docket Number: BVIHCMAP2018/0042
• Date: 14 March 2019

[2019] ECSC J0314-2

EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Before:

The Hon. Mr. Mario Michel Justice of Appeal

The Hon. Mr. Anthony Gonsalves, QC Justice of Appeal [Ag.]

The Hon. Mr. Eamon Courtenay, SC Justice of Appeal [Ag.]

BVIHCMAP2018/0042

Between:

[1] Kwok Kin Kwok

Appellant

and

[2] Crown Treasure Group Limited

and

Yao Juan

Respondent

Appearances:

Mr. Paul Chaisty, QC with him, Mr. Richard Evans for Appellant

Mr. David Fisher with him, Ms. Christina Hart for the Respondent

Commercial appeal — Appointment of liquidator — Unfair prejudice — Whether the trial judge erred in the exercise of discretion in appointing a liquidator — Remedies open to court on an unfair prejudice application — Whether relief granted was just and equitable — Fresh evidence — Whether a respondent can make an application to admit fresh evidence to support the judgment in the court below

The respondent alleged that she and the appellant, through Crown Treasure Group Limited (“Crown Treasure”) a British Virgin Islands (“BVI”) company of which the appellant was sole director, were and are joint venture partners in the development of a hotel (the “Project”). The respondent, as a 50% shareholder in Crown Treasure, sought relief in respect of alleged past and continuing conduct of the appellant as the other 50% shareholder in, and the sole director of, Crown Treasure. The respondent alleged that the appellant's conduct related to the exercise of control over Crown Treasure and its subsidiaries, conduct that has been and will continue to be oppressive, unfairly discriminatory and/or unfairly prejudicial to her in her capacity as a shareholder of Crown Treasure. The respondent brought an unfair prejudice claim under section 184I of the Business Companies Act 2004 (“BCA”) seeking relief, and also sought the appointment of a liquidator of Crown Treasure, pursuant to section 162(1)(b) of the Insolvency Act, the latter specifically on grounds related to a loan contract for a period of 40 years, which the appellant had caused Crown Treasure to sign with Strong Nation (a subsidiary of Crown Treasure). The particulars of conduct of which the respondent maintained complaints were that the appellant, in breach of an agreement or understanding between the parties which came into being before or at about the time they became shareholders in Crown Treasure:

• (a) failed to match the funding provided by or on behalf of the respondent to the Project, contrary to what, on the respondent's case, was agreed between the parties as to the funding of the Project;

• (b) failed to notify the respondent and obtain her prior consent to a number of major decisions, transactions and other important matters relating to Crown Treasure, its subsidiaries, their business and the Claimant's interest in Crown Treasure, including steps that led to the dilution of the respondent's interest in Xiamen RVH (a company incorporated as the entity to hold land and to develop and operate the Project) and the alienation of shares in Xiamen RVH to a third party, in particular causing Strong Nation (a company incorporated in the BVI which Crown Treasure was at all material times the sole shareholder of and Madam Kwok being the sole director) to enter into a cooperation agreement with Cheer Fancy (a company owned and controlled by a Mr. Edmund Eng) which led to the alienation of 20% of the shares in Xiamen RVH held and owned by Strong Nation;

• (c) refused to provide the respondent with information in relation to the business and finances of Crown Treasure; and

• (d) denied the entitlement of the respondent to receive information about the transactions and business of Crown Treasure and its subsidiaries; and also

• (e) entered into funding arrangements with one Edmund Eng and his companies that were not necessary nor beneficial nor in the interests of Crown Treasure or its subsidiaries.

The appellant admitted that she and the respondent each held 50% of the issued Crown Treasure capital and that she was its sole director, but denied that her conduct had been, is and will continue to be unfairly prejudicial to the respondent. The appellant denied the agreement alleged, that she and Madam Yao were joint venture partners in the Project as Madam Yao sought to characterize, and asserted that they were joint venture partners only to the extent that it relates to the investments that each side had put into the Project. The appellant also denied that the respondent was entitled to participate in the management of Crown Treasure.

The learned judge found that there was an agreement between the parties as alleged by the respondent and that in the circumstances of the case it was just and equitable to appoint a liquidator of Crown Treasure. He ordered that Crown Treasure be wound up in accordance with the provisions of the Insolvency Act 2003, appointed joint liquidators of Crown Treasure and gave certain consequential orders and directions.

Being dissatisfied with the decision of the learned judge, the appellant appealed on the grounds that his decision: (i) was an unreasonable and unjustified exercise of any discretion; (ii) was unsupported by any evidence; (iii) was contrary to the evidence and failed to take proper account of same; (iv) took account of issues not pleaded; and (v) failed to provide any adequate reasons or explanation. The respondent sought leave of this Court to adduce, at the hearing of the appeal, fresh evidence in the form of the evidence set out in and exhibited to her witness statement.

Held: allowing the appeal; setting aside the decision of the learned judge; setting aside the consequential order; and awarding costs to the appellant in the court below to be assessed if not agreed within 21 days, costs to the appellant in this Court on the substantive appeal at two-thirds of the costs in the court below and costs to the appellant on the fresh evidence application to be assessed if not agreed within 21 days, that:

• 1. In considering whether there was an agreement between the appellant and the respondent, which brought about an obligation on the appellant to provide information to the respondent, the learned judge appears either to have lumped together the duty to notify and consult/provide information, with the duty to obtain consent in relation to introducing a new investor, without a distinction as to the circumstances. Alternatively, the learned judge appears to have sought to extract from the duty to obtain consent, (where it did exist, in relation to introducing a new investor) a general and unrelated duty to notify and consult. The alleged general duty to provide information/notify and consult and the alleged duty to obtain consent for the introduction of a new investor were distinct issues. In the learned judge's finding of a duty to provide information/notify and consult, he relied on his own analysis of evidence elicited in an exchange between counsel for the respondent and the appellant. On the evidence elicited, a duty to notify, consult and obtain consent existed only at the investor level, that is, in relation to introducing new investors. There is no identifiable basis on which the learned judge properly concluded on the evidence, a duty on the appellant generally to provide information, or to notify and consult. The learned judge erred in this general conclusion.

• 2. On the question of whether the learned judge possessed the jurisdiction to appoint a liquidator, section 184I of the BCA states that: if, on an application made under section 184I, the court considers that it is just and equitable to do so, it may make such order as it thinks fit, including, without limiting the generality of the subsection, one or more of the orders set out in sub-paragraphs (a) through (h). Sub-paragraph (f) refers to the appointment of a liquidator under section 159(1) of the Insolvency Act on the grounds specified in section 162(1)(b) of that Act. The effect of the wording is to confer a very wide discretion on the court to do what is considered fair and equitable in all the circumstances of the case, in order to put right and cure for the future, the unfair prejudice which the petitioner has suffered. Further, the court is not bound by the specific relief sought by the petitioner.

  Re Bird Precision Bellows Ltd [1985] 3 All ER 523 applied; Re Neath Rugby Ltd (No.2); Hawkes v Cuddy and others (No.2) [2009] 2 BCLC 427 applied; Section 184I Business Companies Act 2004, Act No. 16 of 2004 applied.

• 3. In considering the reasonableness of the decision of the learned judge to appoint a liquidator, the premise for his determination that such an order was appropriate was the learned judge's view that it was unfair that the respondent would be locked into an investment for the next 40 years without the hope of seeing any benefit from the investment. This Court having determined that the learned judge erred in finding that there existed the broad agreement pleaded by the respondent and further that the learned judge clearly premised the exercise of his discretion to appoint a liquidator on the basis that all of the complaints had been proven against the appellant, which this Court determined (except in one instance) not to be the case, the learned judge erred in the exercise of his discretion. The consequence is that the learned judge exceeded that generous ambit within which reasonable disagreement is possible when he appointed a liquidator.

• 4. To satisfy the requirements for the admission of further evidence, it must first be shown that the evidence could not have been obtained with reasonable diligence for use at the trial, secondly that the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and thirdly that the evidence must be such as is presumably to be believed, in other words, it must be apparently credible...