St. Ursula v Grey et Al

• Jurisdiction: British Virgin Islands
• Court: Court of Appeal (British Virgin Islands)
• Judge: Davis, C.J.,Bernard, J.A.,Peterkin, J.A.
• Judgment Date: 14 February 1977
• Neutral Citation: VG 1977 CA 6
• Docket Number: Civil Appeal No. 8 of 1975
• Date: 14 February 1977

Court of Appeal

Davis, C.J.; Bernard, J.A.; Peterkin, J.A.

Civil Appeal No. 8 of 1975

St. Ursula

and

Grey et al

Appearances:

J.S. Archibald for the appellants

McW. Todman for the respondents

Contract - Misrepresentation — Whether respondent liable for misrepresentation

Company Law - Capital Adjustment — Whether appellant was entitled to use different formula to calculate capital adjustment sum

Facts: Evidence revealed that appellants were aware of an alleged misrepresentation relating to a defect in title to land.

Facts: Evidence revealed that the respondent purchased shares from the appellant. A clause in the agreement provided for the formula to calculate the capital adjustment sum based on the 1962 Cost of Living Index. The 1962 Index was not published and the appellant sought to use the 1967 Cost of Living Index.

Held: The appellants by accepting a “best endeavour” clause rather than an indemnity clause indicated that they were willing to make the agreement fully aware of the defective title and therefore could not plead misrepresentation.

Held: The trial judge's finding that he was unsure if the use of the 1967 Index instead of the 1962 would yield the same result was acceptable. However, the respondent (whatever the correct adjusted capital sum) was indebted to the appellant for at least the unadjusted capital plus interest. Appeal allowed.

JUDGMENT OF THE COURT:

1 These are two appeals arising out of the same transaction and are heard together by consent.

2 Keystone Limited, a company registered in Nassau, The Bahamas, owned all the shares in the B.V.I. Development Co. Ltd., a company registered under the laws of the British Virgin Islands. On the 29th May, 1970, an agreement called a shares agreement entered into between Keystone Ltd. and the respondents in which the respondents contracted to purchase the whole beneficial interest of Keystone and its nominees in the company in consideration of the Purchasers' payment of the sum of two hundred thousand dollars (U.S. currency) and the Purchasers' covenants and declarations hereinafter in clauses 3 and 4 contained in the said agreement. The respondents paid the sum of $50, 000 the signing of the agreement. On the 3rd June, 1970, Keystone Ltd. assigned with notice its full rights benefits, and obligations under the shares agreement to the appellant company whose name then was St. Ursula Trust Corporation British Virgin Islands Limited. The respondents, on the 28th July, 1970, paid the sum of $150,000 to the appellant company and in accordance with clause 1 of the shares agreement the entire shareholding of Keystone Ltd. and that of its nominees were transferred to them. Annexed to the shares agreement was a schedule of the assets and liabilities of Keystone Ltd. which was inspected by the respondents solicitors before the signing of the agreement. Part of the assets of Keystone consisted of approximately 65 acres of land at Havers fit for development and valued at $582,000. A few days after the beneficial interest in the appellant company was transferred, the respondents had a development plan prepared and began the cutting of roads on the land. One Joseph Anthony claimed that the roads were being made on his property and therefore the respondents ceased their operations and applied to the court for a Certificate of Title in respect of the land. The application was published and two caveats were entered against the title - one by Joseph Anthony and the other by James Christopher.

3 After some time had elapsed the respondents finding they were unable to a meet their obligations under the shares agreement owing to unfavourable economic conditions commenced negotiations with the appellant company with a view to substituting a new agreement in place of the shares agreement. On the 23rd July, 1971, Dickinson who was negotiating with the appellant on behalf of the respondents sent a telex message to Matthissen, who had drafted the shares agreement and was the legal adviser to B.V.I. Development Company Ltd. Paragraph 2 reads:–

2. “I regret that a very serious matter has now arisen which is that surveyors have been physically prevented from carrying out certificate of title survey on top half of Harbours property. Bob feels that as there has been a series of disputes with each major property and that now half Habours is at risk he wonders what future this matter has and he does not see that he can go any further with you until this is clarified as so much value is at risk. We understand one of the adjacent landowners on the eastern boundary has actually leased a portion of the company's land to a third party which took effect before May 29th 1970 and Bob is retaining Rowan Henry to represent him in this matter”.

Matthissen replied on the 26th July, 1971 as follows:

1. “Whilst greatly regretting matters detailed in paragraph two of your telex 23rd July must insist that those matters can have no possible bearing on the legal position under agreement of 29th May 1970 and accordingly for the purposes of our current negotiations must ignore what you report.

2. I am sorry but I cannot accept your interpretation of the correct method of operating an index set out in paragraph one of your telex 23rd July but in order to reach settlement I will advise my clients to accept your view and therefore accept Lionel Barker's amendment in his letter of 2nd July provided the new agreement is signed promptly and interest due there under is paid forthwith. As there are now no differences of opinion an the terms of the new agreement it should not be difficult to finalise new agreement by 31st July.

3. If Bob Gray is not prepared to sign and exchange new agreement promptly then he must operate the old agreement of 29th May 1970 and pay the sums as set out in my letter to Bob Gray of the 22nd May 1971 which sums are now long overdue under the terms of that old agreement. There is no other legal alternative.

4. Reverting to paragraph 2 of your telex 23rd July regarding Harbours would assure Bob Gray that Tom Smith and I will do all in our power to help resolve problem. Tom Walsh carried out full legal survey at time of purchase and only approximately 60 acres were acquired out of 140 acres contracted to be purchased as a good title could only be made out in respect of 60 acres. Tom Smith and I will visit BVI to help clarify the situation if Bob Gray would like us to do so.”

4 On the 12th August, 1971, Dickinson informed Matthissen by telex that the respondents were prepared to sign the new agreement subject to a specific and clear indemnity being given in respect of Havers land, then in dispute. Harbours is also called Havers. Matthissen replied on the 16th August, 1971, as follows:

1. “Surprised at Mr. and Mrs. Gray's request for an indemnity in respect of Harbours land dispute especially in view of terms of my para. one of telex of 26th July.

2. Agreement of 29th May 1970 was for the sale of shares and not of land. There is no dispute as to the title to the shares transferred which should therefore be paid for in accordance with the terms laid down without any reference to any alleged land title problems.

3. Regardless of the clear legal position as to Mr. and Mrs. Gray's liability under the agreement of 29th May 1970 I would draw their attention to the following facts:–

(A) As previously mentioned in my telex of 26th July Leo Smith contracted to a sell one hundred acres in respect of which he alleged he had a good title. After full investigation only sixty acres was accented as having undoubted good title and accordingly only 60 acres was transferred and an option was granted to purchase balance of forty acres on proof of good title.

(B) Edgar Hewlett advised B.V.T.D.C. that the title to 60 acres was good and I personally supported this view.

(C) Harold Harney on behalf of V.I.N.B. who granted a mortgage investigated the title and found it satisfactory.

(D) Later Neville Westwood investigated the title on behalf Barclays Bank DCO and found the title satisfactory.

(E) When Mr. and Mrs. Gray purchased the shares in BVIDC Lionel Barker was given the opportunity of investigating the title which he took up and presumably advised Mr. and Mrs. Gray that the title was satisfactory.

4. In view of the above facts there appears no reason why Mr. and Mrs. Gray should expect my clients to be concerned with a problem of the title to the Harbours land which must ultimately be resolved and which arises over 14 months after the agreement of 29th May 1970 and over 12 months after the completion of the transfer of the shares.

5. I feel that Mr. and Mrs. Gray cannot have given full consideration to the above facts. Accordingly I have persuaded my trustee clients to give them a further ten days from today's date to reconsider the matter and comply one way or the other with the terms of para. two of my telex of 26th July.

6. Tom Smith and I reiterate that we will do everything possible to assist Mr. and Mrs. Gray with the title problems of Harbours.”

On the 20th August, 1971, Dickinson replied: “Robert Gray will complete agreement as long as best efforts clause introduced on your side re Havers Land.”

5 On the 22nd day of October, 1971, a new agreement (hereinafter called the money agreement) was entered into between the appellant company and the respondents replacing the shares agreement and releasing the appellant company and the respondents from all their obligations arising out of the said agreement. The money agreement reads:

“ THIS AGREEMENT is made the 22nd day of October One thousand nine hundred and seventy one BETWEEN ST. URSULA TRUST CORPORATION BRITISH VIRGIN ISLANDS LIIMITED of Road Town Tortola British Virgin Islands by the hand of GORDON GUTTERIDGEE duly authorised Agent acting for and on behalf of the said St. Ursula Trust Corporation British Virgin Islands Limited (herein after referred to as “The Vendors” which...