Sino Union (Caribbean) Holding Ltd v (1) Shangri-La International Development Holding Ltd; (2) Mossack Fonseca Company (BVI) Ltd; (3) Rich Victory Investment Ltd; (4) The Government of the Commonwealth of Dominica [Eastern Caribbean Supreme Court]

JurisdictionCaribbean States
CourtEastern Caribbean Supreme Court
JudgeBannister J [ag]
Judgment Date2009
Docket NumberCLAIM NO: 76 of 2008

IN THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

CLAIM NO: 76 of 2008

BETWEEN

IN THE MATTER OF SHANGRI-LA INTERNATIONAL DEVELOPMENT HOLDING LIMITED

AND IN THE MATTER OF SECTION 43 OF THE BVI BUSINESS COMPANIES ACT, 2004

Sino Union (Caribbean) Holding Limited
Claimant
and
(1) Shangri-La International Development Holding Limited
(2) Mossack Fonseca Co. (BVI) Ltd.
(3) Rich Victory Investment Limited
(4) The Government of the Commonwealth of Dominica
Defendants
Appearances:

Mr Paul Chaisty, Q.C., Richard Evans and Jerry Samuel for Rich Victory. Mr Reginald Armour, S.C. Vanessa Gopaul and Keisha Durham for Sino Union. Mr Anthony Astaphan, S.C., Ms Francine Baron-Royer, Attorney General Dominica, Mr Alick Lawrence and Mrs Tana'ania Small-Davis for Government of Dominica.

[Share transfer — whether conditional — whether cancelled]

Bannister J [ag]
1

In these proceedings the claimant (“Sino Union”) seeks rectification of the register of members of Shangri-La International Development Holding Limited (“Shangri-La”). Sino Union holds 40% of the issued shares in Shangri-La and it is common ground that it has locus to apply for rectification under section 43 of the Business Companies Act, 2004 (“the Act”). Unusually, however, Sino-Union does not apply for rectification in its favour, but in favour of the fourth defendant, the Government of the Commonwealth of Dominica (“the Government”) by asking that the register of members be rectified to record the transfer from the third defendant, Rich Victory Investment Limited (“Rich Victory”) to the Government of 25,500 shares in the capital of Shangri-La, effected by an instrument of transfer dated 12 February 2006 (“the transfer”). The other parties to the proceedings are Shangri-La itself, as first defendant and Mossack Fonseca & Co (BVI) Limited (“Mossack Fonseca”) as second defendant. Mossack Fonseca is Shangri-La's registered agent.

2

The registered shareholders in Shangri-La are currently Sino-Union, with, as I have said, 40% and Rich Victory, with 55%. Two individuals, who play no part in these proceedings, hold the remaining 5%.

The pleadings
3

Because these proceedings were commenced by way of fixed date claim form, the pleadings are exiguous. The Government has not put in any pleading at all and the only pleadings of any significance are the defence and amended defence of Rich Victory. Rich Victory's defence denies that the transfer was effective to transfer legal title of the 25,500 shares since it was not executed with that intention. This pleading is odd, because no transfer of shares passes legal title. That is obtained only by the act of registration. All that passes under an unconditional transfer is the beneficial interest 1. In any event, the defence goes on to plead that the transfer was executed pursuant to an oral agreement between the parties that the transfer was conditional upon the conduct by the Government of a process of due diligence into Shangri-La; the completion of the first phase of a development in which Shangri-La was interested known as the High School project; and

the approval of the instrument of transfer at a general meeting of Shangri-La. The defence goes on to plead that none of these conditions was fulfilled.
4

The defence was amended on 14 May 2008 to plead in addition that the transfer was cancelled on 24 November 2006 by one Kieron Pinard-Byrne (“Mr Pinard-Byrne”), who was the self described “escrow agent” who had custody of the transfer, following instructions given to him by the Government on 8 November 2006 that it did not wish to proceed further and the acceptance by Rich Victory on 24 November 2006 of the Government's “intention”. Finally, the amended pleading says that the Government was notified of the cancellation by letter dated 11 January 2007.

5

This amendment was subsequent to and closely follows the contents of a letter sent by Mr Pinard-Byrne to the Honourable Prime Minister of the Commonwealth of Dominica (“the Prime Minister”) on 1 April 2008, by which the Government was informed for the first time that the transfer had been “cancelled”.

The witnesses
6

The witnesses, in the order in which they gave their evidence were the Prime Minister; Mr Felix Chen (“Mr Chen”); Mr Pinard-Byrne; and Mr David King Hsui (“Mr Hsui”).

7

I found the Prime Minister to be a truthful witness. There was at least one occasion when I thought that he would have been better advised to admit that he had simply failed to spot something or not reacted to some communication in a manner more consistent with the Government's case rather than to attempt to justify the absence of a reaction. Mr Chaisty QC, who appeared together with Mr Richard Evans and Mr Jerry Samuel for Rich Victory, made much of the fact that when lost for an answer the Prime Minister would frequently say “good question”, or make some similar response. I think that that criticism is a valid one, but it does not alter the fact that I felt able to accept with confidence every answer given to me by the Prime Minister on all the central questions of fact which were within his knowledge.

8

Mr Chen was an impressive witness. He is the sole director and chairman of Sino Union and clearly an experienced business man. He was also chairman of the board of Shangri-La for the bulk of the period with which these proceedings are concerned. Although accused by Rich Victory and Mr Hsiu of delinquencies in relation to his stewardship of the affairs of Shangri-La, I had no hesitation in accepting his evidence.

9

Mr Pinard-Byrne has practised as a Chartered Accountant in the Commonwealth of Dominica for upwards of 23 years under the style of KPB Chartered Accountants (“KPB”). I did not find him a satisfactory witness. I had to remind myself more than once that he was not, in fact, party to the proceedings. His oral, like his written evidence was partisan and argumentative. He appeared, if I may so put it, to be promulgating a version of events rather than trying to assist by giving purely factual evidence. When faced with evidence which contradicted his thesis, he became agitated and emotional. He appeared immune to appeals to recognise plain and obvious fact when it appeared to him that it was against Rich Victory's interest to do so. I have to treat his evidence with the greatest caution.

10

Mr Hsiu gave evidence through an interpreter. He had been an acquaintance of the Prime Minister and had been appointed by him to be Ambassador for the Commonwealth of Dominica to the Peoples Republic of China. He was heavily involved with and for a time represented the Government in and about the development which forms the underlying subject matter of these proceedings. He and the Prime Minister have subsequently fallen out. He is clearly associated with and claimed to be authorised to speak for Rich Victory, although the precise nature of his relationship with that company never became wholly clear. He had a tendency to give long speeches rather than to answer the few questions that were put to him and he displayed a visceral animosity towards the Prime Minister and Mr Chen whenever he got (or seized) the opportunity to do so. On the other hand, I found that when he was asked a specific question and could be persuaded to focus on it, he did his best to answer truthfully.

The facts
11

Shangri-La has a wholly owned subsidiary called International Development and Management Limited (“IDM”). IDM is a Cayman registered company. IDM in turn has two wholly owned subsidiaries: one, Paradise Property Holding Limited (“PPH”) is a company registered in the Commonwealth of Dominica; the other, also incorporated under the laws of Dominica, is called Clark Hall International High School Inc (“CHS”). Between them IDM and PPH own some 400 acres of land in Dominica known as the Clark Hall Estate. That land is the subject matter of a proposed development which at present lies stalled.

12

The Prime Minister has made an affidavit in these proceedings. In it he sets out that in about 1993 Dominica made an agreement with one Grace Tung, as promoter, for the development of the Clark Hall Estate under which a number of concessions were granted by Dominica. Despite this, the development never got off the ground. On being elected in early 2004, the Prime Minister embarked on discussions with various parties in an attempt to get things moving. Among the persons with whom the Prime Minister discussed these matters was Mr Hsiu. The Prime Minister's evidence is that Mr Hsiu represented himself to the Prime Minister as the owner or controller of Rich Victory and as a person who spoke for and was able to make decisions on its behalf. By this stage Rich Victory was the owner of the entire issued share capital of Shangri-La which in turn owned the entire issued share capital of IDM. In the witness box Mr Hsiu denied that he had any beneficial or other interest in Rich Victory. In his witness statement sworn in support of an application for the appointment of liquidators over Shangri-La and which he adopts as part of his evidence in the present proceedings, Mr Hsiu “accepts” that he was the appointed agent of Rich Victory in respect of its dealings with Shangri-La.

13

Mr Hsiu also conducted negotiations for a supposed investment of US$20 million into the project by Sino Union. What actually happened was that in about January 2005 Sino Union paid Rich Victory US$20 million for 40% of the issued share capital of Shangri-La. On 26 May 2005 Rich Victory, Sino Union and Shangri-La signed a shareholders agreement governing the rights of Sino Union as 40% and Rich Victory as 55% shareholders of Shangri-La (“the shareholders agreement”). It was pursuant to this agreement that Mr Chen became chairman of Shangri-La's board of directors. I may say at this point that of the US$20 million paid by Sino Union for that shareholding, US$5 million found its way into Shangri-La as a...

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