Mossack Fonseca & Company (B.v.I.) Ltd v [1] Registrar of Corporate Affairs

• Jurisdiction: British Virgin Islands
• Court: High Court (British Virgin Islands)
• Judge: Rawlins, J.A.,Hugh A. Rawlins,Brian Alleyne,Michael Gordon
• Judgment Date: 25 September 2006
• Docket Number: CIVIL APPEAL NO. 13 OF 2005
• Date: 25 September 2006

IN THE COURT OF APPEAL

Before:

The Hon. Mr. Brian Alleyne, SC Chief Justice [Ag.]

The Hon. Mr. Michael Gordon, QC Justice of Appeal

The Hon. Mr. Hugh A. Rawlins Justice of Appeal

CIVIL APPEAL NO. 13 OF 2005

Between:

Mossack Fonseca & Co. (B.V.I.) Ltd.

Appellant

and

[1] Registrar of Corporate Affairs

[2] Financial Services Commission

Respondents

Appearances:

Mrs. Tana'ania Small-Davis for the Appellant

Mrs. Joanne Williams-Roberts for the Respondents

JUDGMENT

Rawlins, J.A.

[1] This appeal, which is against a decision of the master, raises 2 main issues for resolution. First, this Court is required to determine the meaning of the word “solicitor” within the meaning of section 16(2)(a) of the International Business Companies Act.1 The second issue is whether the learned master erred when, having reviewed a Guidance Note circulated by the second respondent, the Financial Services Commission,2 and found that the Note was ultra vires and void,

she refused to issue a declaration to that effect as prayed for by the appellant, Mossack Fonseca. These issues will be better appreciated against the background.

Background

[2] The appellant, Mossack Fonseca is a British Virgin Island (BVI) company, which provides registered agent services to IBCs. PowerPoint Management Limited3 engaged Mossack Fonseca to act as the registered agent for over 600 IBCs. Before the British Virgin Inlands Business Companies Act, 2004, which repealed and replaced parts of the IBC Act, came into force, PowerPoint sought to remove and replace Mossack Fonseca as the registered agent for the 600+ IBCs. For this purpose, the directors of those IBCs passed resolutions to amend their Memoranda of Association by removing the name of Mossack Fonseca and purportedly replaced that company with another service provider. Under section 16(3) of the IBC Act, the amendments would have become effective in the BVI as soon as the first respondent, the Registrar, registered them.

[3] Section 16(2) of the IBC Act specifies that an extract of the resolution authenticated by a certificate either by a Solicitor or by the registered agent must be submitted to the Registrar before such amendments are registered. The section also provides for the documents that must be submitted to the Registrar in order for an amendment to a Memorandum of Association to be registered. Section 16(2) states:

“16(2) A company that amends its Memorandum or Articles must submit to the Registrar an extract of the resolution of members or the resolution of directors amending the Memorandum or Articles, as the case may be, certified as a true copy of the resolution amending the Memorandum or Articles by

• (a) the solicitor engaged in advising the company; or

• (b) the registered agent named in the Memorandum of the company,

and the Registrar must retain and register the certified copy of the extract of the resolution.”

[4] Mossack Fonseca did not certify the resolutions. Instead, Mr. Cheng, a Solicitor who practices in Taiwan, deposed, by affidavit evidence, that he was engaged in advising PowerPoint. He certified the extracts of the resolutions of the directors of the 600+ IBCs. The Registrar registered the resolutions on receipt of these documents from Mr. Cheng, thereby purportedly effecting a change in the registered office and registered agent of these IBCs. According to Mossack Fonseca, in registering the resolutions, the Registrar relied on advice received from the Commission. The advice is also encapsulated in a Guidance Note that the Commission issued and circulated to the public, which states:

“1. Save in exceptional circumstances, a solicitor who, in accordance with section 16(2)(a) of the International Business Companies Act, certifies a copy of the resolution which amends the memorandum or articles of a company incorporated under the International Business Companies Act should be a solicitor who is admitted or entitled to practice in the British Virgin Islands. 2. The Financial Services Commission shall determine whether a case is to be treated as exceptional, having regard to the relevant circumstances of that case.”

[5] Mossack Fonseca applied for summary judgment on its claim, under Part 15 of the Eastern Caribbean Supreme Court Civil Procedure Rules 2000.4 The application was made on the ground that the respondents' defence disclosed no reasonable ground for defending the claim. Mossack Fonseca also sought a declaration that the registration of the amendments to the Memoranda of Association of the 600+ IBCs was ultra vires, invalid and of no effect because they were certified by one Mr. Cheng, a solicitor, who is not admitted or entitled to practice in the BVI within the meaning of section 45(2) of the Interpretation Act.5. Mossack Fonseca further sought an order striking out the amendments to the Memoranda of Association of the 600+ IBCs. And finally they also sought a declaration that the Guidance Note which the Commission issued was ultra vires, invalid and of no legal effect.

[6] The master dismissed the application. She refused to enter summary judgment or to issue any of the declarations or order for which Mossack Fonseca prayed. Instead, she struck out the claim purportedly pursuant to Rule 26.3(1)(c) of the CPR 2000, on the ground that the claim disclosed no reasonable ground for bringing it.

[7] The parties mutually agreed to seek no costs in the master's court. The master accordingly awarded none.6 In paragraph 5(c) of the Notice of Appeal, however, Mossack Fonseca seeks costs in these appeal proceedings and in the Court below. In the absence of mutual agreement, I shall consider costs in these proceedings. However, in keeping with the mutual agreement between the parties, I shall award no costs for the proceedings in the master's court.

“Solicitor” within the meaning of section 16(2) of the IBC Act

[8] In the hearing in the master's court, Mrs. Small-Davis, learned Counsel for Mossack Fonseca, noted that the IBC Act does not define “solicitor”. She therefore relied on the definition of the word that is contained in the Interpretation Act, which defines “solicitor” as a person who is admitted and entitled to practice in the Territory of the British Virgin Islands. She submitted that since PowerPoint is a company, which is incorporated under the laws of the BVI, it can only be advised by a solicitor whose training and qualifications entitle him or her to practice in the BVI, particularly where advice is to be given on compliance with BVI laws.

[9] On the other hand, Mrs. Roberts-Williams, learned Counsel for the Registrar and for the Commission submitted that in the context of its use in section 16(2)(a) of the IBC Act, the words “solicitor engaged in advising the company” must be taken in the context of the IBC Act as a whole. She submitted, further, that in this context, the word “solicitor” is ambiguous and must be given a purposive construction.

The master's decision

[10] The master's analyses in response to these submissions are in paragraphs 9 to 12 of her judgment. In paragraph 9 she stated that section 16(2)(a) of the IBC Act is capable of bearing more than one meaning and that it should be read in the context of the legislation. According to the master, the Act envisages that solicitors in the BVI will act as solicitors established by the Act, but it was also the intention of Parliament not to exclude an IBC from having a solicitor, other than one admitted in the BVI, to advise that company and to certify resolutions. In paragraph 10, the master referred Cross on Statutory Interpretation,7 and to the principles there extracted from the statements by Lord Reid in 3 House of Lords cases. These state:

‘In determining the meaning of any word or phrase in a statute the first question to ask is what is the natural or ordinary meaning of that word in its context in the statute? It is only when that meaning lead to some result which cannot reasonably be supposed to have been the intention of the legislature that it is proper to look for some other possible meaning of the word or phrase.’ Pinner v Everett [1969] 3 AER 257 at 258–259.

‘Then [in case of doubt] rules of construction are relied on. They are not rules in the ordinary sense of having some binding force. They are our servants, not our masters. They are aids to construction, presumptions or pointers. Not infrequently, one “rule” points in one direction, another in a different direction. In each case we must look at all relevant circumstances and decide as a matter of judgment what weight to attach to any particular “rule”. Maunsell v Olins [1975] AC 373 at 382.

It is a cardinal principle applicable to all kinds of statutes that you may not for any reason attach to a statutory provision a meaning which the words of that provision cannot reasonably bear. If they are capable of more than one meaning, then you can choose between those meanings, but beyond that you must not go.’ Jones v Director of Public Prosecutions [1962] AC 635 at 662.

[11] In paragraph 11 of the judgment, the master stated that notwithstanding the definition of “solicitor” in the Interpretation Act, the literal reading of section 16(2)(a0 of the IBC Act, in its entirety, refers to any solicitor who is engaged in advising the company irrespective of whether that solicitor is entitled to practice in the BVI or not. The master reasoned that since the overall functioning and day to day management and operation of IBCs are outside of the BVI, it is logical to expect that Mr. Cheng or any solicitor who is engaged in the business of advising an IBC would be in a position to certify the validity of an extract of a resolution of the directors seeking to amend the company's Memorandum and Articles. According to the master, Parliament is presumed to have known of the definition in the Interpretation Act, but in its wisdom qualified “solicitor” as the one actually engaged in...