PCB Triumphs in Privy Council Jurisdiction Battle

Posted on: January 21st, 2015

 

PCB Litigation has successfully appealed a decision of the BVI Court of Appeal which has important implications for the shareholders of 700,000+ BVI holding companies. When the proceedings were issued in BVI, PCB were instructed by the primary defendant to deal with the overall strategy of the litigation, and took the view that it was wrong for their client to be faced with claims in the BVI Court about ownership of shares in a BVI company, where the underlying facts had nothing to do with the BVI. PCB Litigation partner Trevor Mascarenhas said: “We took the view when this claim was issued 5 years ago that it had been issued in the wrong forum. We sought to agree that it be heard in England, which was clearly the appropriate forum for this claim, but the Claimants did not agree. We are delighted that the Privy Council has now vindicated our client’s decision to dispute jurisdiction”

The case

“If foreigners incorporate companies in the BVI they must expect to have to come to the BVI to litigate disputes going to the membership and administration of such companies”. This sweeping statement by the BVI Court of Appeal raised the spectre of shareholders of BVI companies being dragged before the BVI Courts to respond to claims in which the underlying facts have nothing at all to do with the BVI. Nilon Ltd and another v Royal Westminster Investments SA and others [2015] UKPC 2 was just such a case. It related to an agreement made in England between individuals to operate a commercial venture through one of the BVI’s 700,000+ holding companies, and a dispute as to who under the agreement were to be the shareholders.

The Claimants sought to have their alleged shareholdings recognised by bringing a claim to rectify the register of members of the company, Nilon, and to join the existing shareholder, Mr Varma, as a necessary and proper party to that rectification claim. Mr Varma succeeded before the Judge in setting aside permission to serve him out of the jurisdiction and Nilon had the claim struck out. However, the Court of Appeal in BVI reversed that decision, holding that rectification proceedings were a suitable vehicle for the hearing of the underlying contractual dispute and that BVI was clearly the appropriate forum for such proceedings.

PCB Litigation, who had acted for Mr Varma at all stages, instructed Richard Snowden QC and Stuart Ritchie QC before the Privy Council on appeal from the BVI Court of Appeal. The Privy Council held that rectification proceedings could not be used to determine questions of beneficial interests in shares, finding that the English Court of Appeal decision in Re Hoicrest Ltd [2000] 1 WLR 414 on which the Respondents and BVI Court of Appeal had placed much reliance was wrongly decided. Although that was determinative of the appeal in favour of Mr Varma and Nilon, the Privy Council went on to consider the Court of Appeal’s approach to appropriate forum given that it raised a point of general principle. Before the matter reached the Privy Council the BVI had introduced new rules with a new gateway allowing the BVI Court to assert jurisdiction in any claim that relates to the ownership of a BVI company, subject to the Court being satisfied BVI is the appropriate forum. The Privy Council made it clear that the BVI Court of Appeal’s approach was wrong. The fact that Nilon is a BVI company was not a factor that outweighed the many factors pointing away from BVI as the appropriate forum such as the location of the agreement, parties and witnesses.

PCB Litigation has been instructed in numerous disputes where the substantive proceedings take place in offshore and other overseas jurisdictions, or where the strategy requires interim relief to be obtained from Courts all around the World. If you would like any further information, please contact Steven Philippsohn, Anthony Riem or Trevor Mascarenhas.