Central Bank Of Ecuador And Others v Conticorp SA And Others

Strict duties imposed on directors must be discharged, even if they are nominee directors. The Central Bank of Ecuador v Conticorp [2016] 1 BCLC 26 decision illustrates the dire implications for a director who merely follows instructions and by so doing fails to discharge his duties to the company.

Directors duties

"...A nominee director is not entitled to forego, or surrender to another, any exercise of his discretion, however paltry the amount he may be paid."

The Privy Council (the Board) heard a claim against a group of companies and individuals who were alleged to have dishonestly assisted in causing the assets of the Appellant to be transferred to the first Respondent and for the benefit of the Respondents to the detriment of the Appellant.

The Central Bank of Ecuador decision is a very important one as it can be relied on to assist with establishing (i) the circumstances in which an appellant court may be justified or in fact required to intervene to interfere with a decision based on concurrent findings of pure fact; conclusions of primary fact; or one where a party is exonerated of want of probity; (ii) establishing dishonest procurement or dishonest assistance of a director whether acting as a nominee or shadow director.

Summary of facts

The Appellant, Interamerican Asset Management Fund Limited (IAMF/the Appellant) was incorporated in Bahamas and brought a claim against an Ecuadorian company Conticorp SA (Conticorp) and a group of subsidiary companies alleging that Conticorp, through its principal shareholders and owners, controlled all of IAMF's decisions and affairs and that although the Appellant was presented to the world as an independent investment management fund with Mr Michael Taylor (Mr Taylor) as its sole director and nominated investment adviser, it was no more than an instrument executing the Respondents' instructions.

The individual defendants to IAMF's claim were the principal shareholders and owners of Conticorp holding 51 per cent of Conticorp's shares. These four brothers, Ecuadorian nationals, are referred to as the Ortega Trujillo family and are lawyers by profession. Conticorp owned Grupo Financiero Conticorp SA (GFC) whose principal subsidiary was Banco Continental SA (Banco Continental) which in turn owned Banco Continental

Overseas NV (BCO Curacao). GFC as well as Banco Continental were both Ecuadorian companies while BCO Curacao was incorporated in the Netherland Antilles.

The Appellant held assets in the value of US$192 million which comprised cash, shareholdings and portfolios of loans granted to Conticorp and its related companies.

In 1995, at a time of severe financial difficulty for Banco Continental and BCO Curacao, the Appellants, by three transactions, transferred or surrendered its cash, portfolios and shareholdings to Conticorp in exchange for shares which, the Appellant alleged, were not or could not honestly have been thought to have value, or at least value commensurate with that of the cash, loans and shares which the Appellant was...