Legal Update - Spring 2015

Nilon Limited v Royal Westminster Investments SA [2015] UKPC 2

Lennox Paton acted for Nilon Limited who succeeded in their defence of a claim to rectify their share register brought by Royal Westminster Investments SA. The background facts are somewhat complex but essentially they concerned a purported oral agreement between a Mr Varma on the one hand and members of the Mahthani family on the other. The Mahtani family alleged that Mr Varma had agreed to incorporate Nilon Limited in the BVI and to issue shares to the Mahtanis in return for consideration. Nilon Limited denied that such an agreement existed and argued that the money received from the Mahtanis was a loan. Nilon further argued that sums paid to the Mahtanis from Nilon were interest payments and not dividends. The Privy Council had to decide whether the Mahtani family had "a good arguable case" against Nilon for rectification of the share register. This was important because if the claim against Nilon was struck out any claim against Mr Varma would also fail because Nilon was the "anchor defendant" in the BVI and the BVI Court would not otherwise have jurisdiction over Mr Varma who was not resident in the jurisdiction.

The Manhanti family relied upon the English Court of Appeal decision in Re Hoicrest Ltd [2000] 1 WLR 414. At first instance, Bannister, J., held that this case had been incorrectly decided. The Eastern Caribbean Court of Appeal reversed his Judgment and held that the English authority was good law. In the Privy Council, Lord Collins held that Bannister, J., had been correct in his analysis of Re Hoicrest Ltd which appeared to be in opposition to all prior common law authority. The Privy Council found that the only claim which the Manhanti family had was for alleged breach of an oral contract which fell to be decided before the English courts and not the Commercial Court in the BVI.

The case is also important because Lord Collins went on to make obiter comments in relation to the doctrine of forum non conveniens. He criticised the Eastern Caribbean Court of Appeal's comments that because the underlying subject matter of the dispute was shares in a BVI company this lead to the conclusion that "the BVI was clearly the appropriate forum for trial of a preliminary issue of the questions arising between the members and the alleged members of Nilon." Lord Collins disagreed with this analysis and held that in this case the most appropriate forum should be viewed from the...