In what is likely to be considered a landmark decision, the BVI
Commercial Court has held that winding up proceedings brought on
just and equitable grounds relating to BVI companies will not be
caught by an exclusive jurisdiction clause contained in a
shareholders agreement, unless the agreement expressly precludes
the shareholders from relying on their statutory right to apply to
wind the company up.
While there have been several decisions of the BVI court
considering the ability of parties to refer winding up proceedings
and other corporate disputes to arbitration, this is the first
reported decision concerning the application of exclusive
jurisdiction clauses to such disputes.
Kea Investments Limited v Novatrust Limited concerns a
joint venture company incorporated in the BVI. Although the joint
venture company was incorporated in the BVI, the shareholders'
agreement regulating the parties' rights and responsibilities
relating to the joint venture included an exclusive English law and
jurisdiction clause. The joint venturers fell out, resulting in
deadlock, and one of them, Kea, applied in the BVI for the
appointment of liquidators on just and equitable grounds. The other
shareholder, Novatrust, subsequently filed proceedings in the
Chancery Division in England against Kea (and others) to enforce
certain terms of the shareholders' agreement, and then applied
in the BVI for the liquidation application to be dismissed on
jurisdictional grounds, relying principally on the existence of the
exclusive jurisdiction clause in the shareholders'
agreement.
Novatrust argued that the well-known House of Lords decision in
Fiona Trust v Privalov [2007] 4 All ER 951 applied equally
to jurisdiction clauses as to arbitration clauses, meaning that
such clauses were to be interpreted broadly to encompass any
conceivable dispute which may arise between parties to the relevant
contract, including liquidation proceedings. As a result, Novatrust
argued that Kea was precluded from applying to appoint liquidators
anywhere other than England, and in support of this it was argued
that the English Courts would have jurisdiction to wind the company
up. Kea raised a number of arguments in opposition, including that
the exclusive jurisdiction clause cannot have been intended to
apply to liquidation proceedings. Bannister J held that Kea's
right to apply to wind the company up arose not out of the
shareholders' agreement but under the company's memorandum
and articles of association, holding that it "would be
extraordinary if it could have been deprived of that right by
contractual arrangements entered into subsequently, unless of
course the subsequent contract express wording precluding Kea from
relying upon its rights under the [Business Companies] Act, which
are distinct from its rights as a party to the SHA."
Bannister J went on to hold that the BVI application should not be
dismissed on forum non conveniens grounds, because he was not
satisfied that there were sufficient connections between the
company and England so as to engage the English court's
exorbitant jurisdiction to wind up a foreign company, and because
he was not satisfied in any event that England was clearly or
distinctly the more appropriate forum for the determination of the
proceedings.
Whilst it is likely that this decision will be appealed, the ruling
confirms that the prevailing view of the BVI Commercial Court is
that disputes relating to BVI companies are best litigated in the
BVI courts. If another forum is to be preferred for disputes,
whether the courts of another country or arbitration, parties must
seek appropriate advice in order to ensure that their choice of
forum will be upheld.
Harneys acts for Kea Investments Limited, the successful party
in the decision referred to above.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
