Net International Property Ltd v Adv. Eitan Erez (as Trustee in Bankruptcy for Rachel Sofer Sayag)

CourtEastern Caribbean Supreme Court
Docket NumberBVIHCMAP2020/0010
JudgeWebster JA
Judgment Date22 Feb 2021
JurisdictionCaribbean States
Neutral Citation[2021] ECSC J0222-2
[2021] ECSC J0222-2

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Before:

The Hon. Dame Janice M. Pereira, DBE Chief Justice

The Hon. Mr. Paul Webster Justice of Appeal [Ag.]

The Hon. Mde. Vicki Ann Ellis Justice of Appeal [Ag.]

BVIHCMAP2020/0010

Between:
Net International Property Limited
Appellant
and
Adv. Eitan Erez (As Trustee in Bankruptcy for Rachel Sofer Sayag)
Respondent
Appearances:

Mr. John Carrington, QC for the Appellant

Ms. Tameka Davis and Ms. Allana-J Joseph for the Respondents

Commercial appeal — Recognition and assistance pursuant to common law or inherent jurisdiction of the court — Jurisdiction of the court to grant recognition and assistance to trustee — Parts XVIII and XIX of the Insolvency Act — Whether the Insolvency Act, expressly or by necessary implication, abrogated the common law right of recognition, notwithstanding that Part XVIII is not yet effective — Whether the common law power to grant assistance survives having regard to the provisions of Part XIX of the Insolvency Act — Res judicata — Whether issues raised by appellant in its defence are res judicata — Fixed date claim — Dealing with fixed date claim summarily — Rule 27.2(3) of the Civil Procedure Rules 2000 — Whether judge erred in exercise of discretion to try fixed date claim form summarily at first hearing — Jurisdiction to rectify register of members — Whether learned judge erred in ordering registered agent of the company to rectify the register of members — Costs

This appeal arises out of proceedings in Israel concerning ownership of the shares comprised in a bearer share certificate issued by the appellant, Net International Property Limited (“Net International” or “the Company”). The District Court in Israel found that Mrs. Rachel Sayag Sofer (“Mrs. Sofer”) was the owner of the bearer shares and the controlling owner and moving force of Net International. The District Court declared that all the assets of the Company belonged to Mrs. Sofer and that they were therefore acquired by the bankruptcy estate. The District Court also ordered the respondent, Advocate Eitan Erez (“the Trustee”), the sole trustee of Mrs. Sofer's assets in the bankruptcy proceedings, to take steps in the Territory of the Virgin Islands (“BVI”) to register himself as shareholder of Net International in accordance with the Company's articles. On appeal, the Supreme Court adopted the findings of fact of the District Court, allowed the appeal and set aside the finding of the District Court insofar as it attributed ownership of the assets of Net International to Mrs. Sofer, and remitted the case to the District Court.

In January 2020, the Trustee applied to the Commercial Court in the BVI by fixed date claim form for an order, under the inherent or common law jurisdiction of the Court, for recognition of himself as the trustee of the assets of Mrs. Sofer in the BVI, namely, her beneficial and legal interests in all the shares of Net International. The Trustee also sought orders for assistance in registering himself as the shareholder of Net International and powers to deal with the shares of the Company as if he was the registered shareholder of the Company. The learned judge, having heard the claim summarily, recognised the Trustee as the trustee of the assets of Mrs. Sofer and ordered that the Trustee be registered as a shareholder of Net International. The learned judge also ordered the registered agent of the Company to rectify the register of members of the Company and gave the Trustee liberty to apply for an order that the costs of the proceedings in the Commercial Court be paid by the current shareholder of the Company.

Being dissatisfied with the learned judge's decision, Net International appealed against the orders of the learned judge. The following issues arise on appeal: (i) the jurisdiction of the court to grant recognition and assistance to the Trustee; (ii) whether the issues raised by Net International in its defence of the claim are res judicata having regard to the findings and decisions of the courts in Israel; (iii) whether the learned judge erred in hearing and disposing of the claim summarily; (iv) whether the learned judge erred in ordering the registered agent of Net International to rectify the register of members of the Company to show the Trustee as the owner of shares in the Company; and (v) Costs.

Held: allowing the appeal in part; affirming paragraph 1 of the judge's order dated 9 th June 2020, setting aside paragraphs 2, 3 and 4 of the said order and directing that submissions on costs be filed, that:

  • 1. Recognition was a part of the common law of the BVI before the passing of the Insolvency Act in 2003 and continues to be. A local court in the BVI has power under the common law to recognise a foreign office holder as having status in the BVI in accordance with his or her appointment by the foreign court. Recognition is usually accompanied by assistance which gives the foreign office holder powers to deal with the local estate. However, recognition does not necessarily include assistance.

    Re African Farms Ltd [1906] TS 373 applied; Rubin and another v Eurofinance SA and others [2012] UKSC 46 applied; Re Manhattan Investments Fund Ltd BVI Civil Suit No. 19 of 2000 (delivered 20th March 2000, unreported) considered; Globe-X Management Limited and others v Clifford Johnson and another AXAHCVAP2003/0004 (delivered 23rd May 2005, unreported) applied.

  • 2. An established common law right may be abrogated by necessary implication where statute provides a comprehensive scheme that replaces the common law right. While Part XVIII of the Insolvency Act, 2003 provides a comprehensive scheme for the recognition of foreign office holders that may be sufficient to abolish the common law of recognition, Part XVIII is not yet effective. Therefore, the common law right of recognition survives in the BVI and the Trustee was entitled, under the common law jurisdiction of the local court, to seek recognition. The learned judge did not err in granting him common law recognition.

    Part XVII of the Insolvency Act, 2003, Act No. 5 of 2003, Laws of the Virgin Islands applied; Dimitry Vladimirovich Garkusha v Ashot Yegiazaryan et al BVIHCMP2015/0010 (delivered 6th June 2016), [2016] ECSCJ No. 103 applied; Islington London Borough Council v Uckak and another [2006] EWCA Civ 340 applied.

  • 3. Part XIX of the Act provides a complete code for foreign representatives from designated foreign countries to apply to the BVI courts for assistance. However, Israel has not been designated as a relevant foreign country and the Trustee is not entitled to apply for assistance under Part XIX of the Act. Assistance is no longer available at common law to foreign office holders from non-designated countries.

    Part XIX of the Insolvency Act, 2003, Act No. 5 of 2003, Laws of the Virgin Islands applied; Re C (a Bankrupt) BVIHC (Com) 0080 of 2013 (delivered 31st July 2013, unreported) followed.

  • 4. The doctrine of res judicata comprising cause of action estoppel and issue estoppel provides that a decision of a court of competent jurisdiction cannot be reopened and relitigated in subsequent proceedings between the same parties or their privies. It is also an established principle that the court will prevent a party from raising, in extant proceedings, an issue that was essential to the existence or non-existence of the cause of action in an earlier case between the same parties, but which was not raised by the party who now seeks to rely on the issue. In this case, there is no cause of action estoppel because the substantive issue of the Supreme Court in Israel regarding the Trustee's ability to pierce the corporate veil of Net International and claim the assets of the Company was not resolved in favour of the Trustee and is not being challenged in the BVI proceedings. There is, however, an issue estoppel regarding the shares comprised in the bearer share certificate by which Net International would be estopped from raising any issue that any person other than that Mrs. Sofer is the beneficial owner of the bearer shares. This estoppel does not apply to Net International's ability to give evidence as to the state of the Company's register and any related issue regarding the Company's current shareholding.

    Henderson v Henderson (1843) 3 Hare 100, 114–115 applied; Greenhalgh v Mallard [1947] 2 All ER 255 at 257 considered.

  • 5. A trial judge managing a case commenced by fixed date claim form has the power to try the claim summarily at the first hearing. This is a case management decision and it is inappropriate for an appellate court to interfere with the judge's decision unless it is plainly wrong. In this case, Net International was not given an opportunity to file evidence in support of its case, the Trustee did not apply to the Company to deal with the disabled bearer shares and the registered shareholder was not given an opportunity to resist what could amount to a cancellation of his or her shares. The judge erred in deciding to hear the fixed date claim summarily and this is an appropriate case to set aside his decision.

    Part 27 of the Civil Procedure Rules 2000 applied; Richard Frederick and another v The Comptroller of Customs and another Saint Lucia Civil Appeal HCVAP2008/0037 (delivered 6th July 2009, unreported) considered; Agnes Danzie and others v Cecil Anthony Saint Lucia Civil Appeal HCVAP2015/0009 (delivered 4th December 2015, unreported) considered; Travis Augustin v Choc Estates Limited Saint Lucia Civil Appeal HCVAP2014/0002 (delivered 9th June 2015, unreported) considered.

  • 6. The court does not have jurisdiction to rectify the share register of the Company to show the owner of disabled bearer shares as a registered shareholder. Further, the rectification order should have been directed to the Company itself and/or its directors, and not the registered agent,...

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