BERMUDA
BRITISH VIRGIN ISLANDS
CAYMAN ISLANDS
APRIL 2015 DECEMBER 2015
ISSUE NO. 1 1
BERMUDA BRITISH VIRGIN ISLANDS CAYMAN ISLANDS DUBAI HONG KONG LONDON MAURITIUS SINGAPORE / conyersdill.com
OFFSHORE CASE DIGEST
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Editor
Bermuda Christian R. Luthi
Assistant Editor
Bermuda Stephanie Hanson
Contributors
Bermuda Ben Adamson Scott Pearman
British Virgin Islands Tameka Davis
Cayman Islands Paul Smith Erik Bodden
Hong Kong Nigel K. Meeson, QC Norman Hau
This update is not intended to be a substitute for legal advice or a legal opinion.
It deals in broad terms only and is intended to merely provide a brief overview
and give general information.
BERMUDA | BRITISH VIRGIN ISLANDS | CAYMAN ISLANDS
About Conyers Dill & PearmanFounded in 1928, Conyers Dill & Pearman is an international law firm advising on the laws of Bermuda, the British Virgin Islands, the Cayman Islands and Mauritius. With a global network that includes 130 lawyers spanning eight offices worldwide, Conyers provides responsive, sophisticated, solution-driven legal advice to clients seeking our expertise on corporate and commercial, litigation, restructuring and insolvency, and private client and trust matters. Conyers is affiliated with the Codan group of companies, which provides a range of trust, corporate secretarial, accounting and management services.
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This update is not intended to be a substitute for legal advice or a legal opinion.
It deals in broad terms only and is intended to merely provide a brief overview
and give general information.
3 / conyersdill.com
The Offshore Case Digest offers readers a high level summary of the major commercial cases decided in Bermuda, the British Virgin Islands and the Cayman Islands between April 2015 and December 2015. Our goal is to provide a useful reference tool for clients and practitioners who are interested in the development of case law in each jurisdiction.
ABOUT THE DIGEST
We would welcome any feedback and suggestions from readers on the content. If you would like to obtain further information on any of the cases, feel free to contact any of the Conyers Dill & Pearman litigation team.
JURISDICTION PAGE
Bermuda 2
British Virgin Islands 6
Cayman Islands 12
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SUPREME COURT
SHARE TRANSFER - INJUNCTION TO RESTRAIN COMPANY FROM HOLDING SPECIAL GENERAL MEETING TO ADOPT AMENDED BYE-LAWS - PRE-EMPTION RIGHTS
M Pulido -v- UST Holdings Ltd et al [2015] SC (Bda) 67 Com (25 September 2015)
A transferee of shares who has not yet been registered on the share
register of the company does not have standing to obtain interim relief
prohibiting an impugned meeting. Hellman J found that a transfer of
shares who contended that they were the legal owner of 50,000
shares in UST Holdings Ltd (the Company), but who had not yet been
entered on the company register, did not have standing to seek
injunctive relief to prevent a resolution being put to the members of
the Company to adopt restated bye-laws in full substitution for the
Companys existing bye-laws.
Under the new proposed bye-laws, the Company could refuse to
register the Plaintiff as a shareholder without giving any reason. The
Transferee strongly suspected one of the purposes of restating the
bye-laws was to allow the Company to prevent him from becoming a
member.
It was held that a company is not bound to recognise trusts of shares;
the company can only look to the man whose name is upon the
register. A company is not obliged to recognise a person claiming title
to shares as transferee until an instrument of transfer in the prescribed
form has been submitted for registration and has been registered. The
Company could consider the restatement of the bye-laws without
regard to the Transferees beneficial interest. The material distinction
was held to be not between legal and beneficial ownership, but
between members and non-members. Only members have standing to
challenge a proposed restatement of a companys bye-laws in the
courts.
CONFIDENTIALITY IN TRUST PROCEEDINGS - SECTION 47 OF THE TRUSTEE ACT - PRIVACY OF BENEFICIARIES
BCD Trust [2015] SC (Bda) 83 Civ
Confidentiality in trust proceedings, especially non-contentious
proceedings, can be a pressing issue for trustees. Trustees sometimes
need to obtain the guidance of the Bermuda Court, or the exercise of
the Courts broad powers under Section 47 of Bermudas Trustee Act,
on entirely non-contentious issues. The trustees may not, however,
want undue press attention placed on the beneficiaries. Trustees may
avoid seeking the assistance of the Court if, by doing so, they might
undermine their beneficiaries privacy. For this reason, trustees often
seek confidentiality orders, which typically provide that the names of
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the parties involved can be anonymised in the cause book, for the
hearing to be heard in private and for subsequent access to court files
by the public to be restricted.
Confidentiality, however, is increasingly hard to find in modern courts.
The courts continually trend towards ever greater transparency. While
non-contentious trust actions were, in the past, heard in chambers
(which meant members of the public and the press were in practice,
left outside), chambers hearings are now held in court rooms to which
the public have ready access. Further, due to recent procedural
reforms in Bermuda, court papers held in the Registry are increasingly
open to public and media scrutiny.
Thus, confidentiality orders are in increasing demand. They can,
however, be hard to obtain. In England for example, such orders, even
in non-contentious matters, are treated as exceptional and only
granted on the basis of cogent evidence of need (V -v- T [2014]
EWHC 3432 (Ch) Civ). This effectively means that trustees must show
evidence of a security risk or dangers such as false friends latching on
to minor beneficiaries.
In BCD Trust [2015] SC (Bda) 83 Civ, Kawaley CJ in an ex tempore
ruling adopted a liberal and pragmatic approach. The Chief Justice
emphasised that the Bermuda Constitution specifically permits the
Courts to hold hearings in private if it considers it necessary or
expedient for the protection of the private lives of the persons
concerned in the proceedings. He also commented that, in the
absence of any obvious public interest in knowing about internal trust
administration, it was in the public interest to deal with non-
contentious trust applications as private hearings.
Trustees who wish to obtain the Courts guidance, while protecting the
privacy of the beneficiaries, can be confident that their privacy will be
protected.
COMPANY LAW - SHAREHOLDERS - TEST FOR UNFAIR PREJUDICE - APPLICATION TO PUBLIC COMPANIES
Annuity & Life -v- Kingboard [2015] (Bda) LR 97
Shareholders who believe that they are being treated unfairly have
several remedies. One of the most effective can be an unfair prejudice
petition. Such petitions were historically rare in Bermuda, not least
because the hurdle is a high one. A petitioner must not only show that
its interests (as shareholder) have been unfairly prejudiced. It must
also show that the prejudice is so bad that it would justify the winding
up of the company on just and equitable grounds.
In Annuity & Life -v- Kingboard [2015] (Bda) LR 97, Kawaley CJ found
that this test had been met. What makes the case particularly notable
is that Kingboard is a company publically listed on the Singapore
Stock Exchange.
The shareholders allegations in Kingboard were two-fold. The first
allegation was that Kingboard had intentionally depressed its own
profitability. The Claim was that Kingboard, which produced copper
foil and sold it to affiliated companies, had been selling its copper foil
at an under-value. Shareholders in Kingboard, it was claimed, suffered
at the expense of shareholders in the affiliated companies. The
second allegation was that, when minority shareholders raised these
allegations and blocked Kingboards ability to sell its copper foil to
affiliates, as they had the power to do, Kingboards reaction had been
unreasonable. (Kingboards reaction had been to cease producing
copper foil altogether, instead licensing its production facilities to a
third party. The third party then proceeded to supply copper foil to
the same affiliates).
Much of the trial was taken up with the allegations of transfer pricing
and allegations as to whether or not the licensing arrangement was a
sham. Ultimately, Kawaley CJ rejected the transfer pricing allegations
in their entirety and also rejected the Claim that the license
arrangement was a form of sham. He did, however, find that
Kingboards reaction (ceasing all production of copper foil) to the
minority shareholders concerns about transfer pricing had been
unreasonable and a visible departure from the standards of fair
dealing. He concluded that the test for unfair prejudice had been met
and that the remedy was for the majority shareholders to purchase