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Case details

Fang Ankong and another (Appellants) v Green Elite Ltd (In Liquidation) (Respondent) (Virgin Islands)

Case ID: JCPC 2023/0107

Jurisdiction: Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands)

Case summary

Issue

Whether the Court of Appeal erred in applying the Duomatic principle and holding the Defendants personally liable.

Facts

  1. In or around 1999, Mr Fang, Mr Oojen and Mr de Leeuw started a joint venture called Taizou Chiho-Tiande Metal co Ltd ("CT Metals"). At the outset shares in CT Metals were held equally by by Mr Fang, acting through the Second Appellant ("HWH") and various Delco companies ("Delco"), a vehicle for the interests of Mr van Oojen and Mr de Leeuw each.
  2. In or around 2008, Mr Fang, Mr van Oojen and Mr de Leeuw decided to float their business on the Hong Kong Stock Exchange. As part of the arrangements for the planned IPO, there was an agreement or understanding reached between Mr de Leeuw and Mr van Oojen and Mr Fang that there would be an incentive scheme for certain key employees, (the Second, Third and Fourth Defendants) ("the Understanding").
  3. On 8 July 2008, New Asset Holding Ltd ("NAH") was incorporated in the BVI to serve as the asset-holding vehicle for the planned incentive scheme. Delco and HWH transferred to 4 shares to NAH each (collectively "the CT shares"). These shares were then transferred to a discretionary settlement ("the FDG trust") with the beneficiaries being the Second, Third and Fourth Defendants.
  4. The 2008 IPO was aborted due to the global financial crisis.
  5. By early 2010, the proposals for an IPO were revived. It was decided that the FDG Trust would be unwound as part of the preparations for the IPO. As a result the CT shares were transferred back to Delco and HWH.
  6. On 20 January 2010, Green Elite, the Respondent, was incorporated in the BVI as a vehicle with the sole purpose of giving effect to the Understanding in place of the FDG Trust. HWH and the Delvo entity were 50% shareholders in the Respondent The First, Second, Third and Fourth Defendants were appointed as its directors.
  7. On 12 July 2010, CT was listed on the HKSE. On 2 April 204, Green Elite, managed by Mr Fang, sold the CT shares to Tai Security Holding Ltd ("Tai Security") for HK$150million ("the sale proceeds"). Mr Fang received the sale proceeds and paid these out as well as dividends to the Second, Third and Fourth Defendants in a series of separate transactions.
  8. On 14 December, Green Elite acting through its liquidators commenced these proceedings in the BVI Commercial Court. It sought an order that the Defendants account to for the sale proceeds and any dividends received on the basis that:
    (1) the Defendants breached their fiduciary duties (as outlined in section 121 Business Companies Act 2004 ("BCA")); and
    (2) they failed to comply with the approval and authorisation requirements (section 175 BCA).
  9. 9. The Defendants defended the claim on the following bases:
    (1) the shareholders of Green Elite assented to the distribution of the sale proceeds and dividends for the benefit of the Second, Third and Fourth Defendants within the meaning of the principle in Re Duomatic [1969] 1 Ch 365 ("Re Duomatic");
    (2) accordingly there was no breach of fiduciary duties in s121 BCA;
    (3) there was no failure to comply with the authorisation requirements in s175 BCA as there was (a) no disposition of more than 50% in value of the assets in Green Elite and therefore some formalities did not apply (b) the distribution of the sale proceeds and dividends was made in the usual course of Green Elite's business and finally (c) there was a Duomatic assent and in any event this satisfied the relevant formalities.
  10. On 17 January 2022, the trial judge handed down judgment allowing Green Elite's claims under sections 121 and 175 BCA. The judge accordingly ordered the Defendants to pay the sale proceeds and dividends and other costs.
  11. The Defendants appealed to the Court of Appeal. By judgment dated 9 January 2023, the Court of Appeal dismissed the appeal.
  12. By an Order dated 25 September 2023, the Court of Appeal granted the Appellants Final Leave to Appeal to the Privy Council.

Parties

Appellant

(1) Fang Ankong, (2) HWH Holdings Ltd

Respondent

Green Elite Ltd (In Liquidation)

Appeal

Justices

Lord Briggs, Lord Sales, Lord Hamblen, Lord Burrows, Lord Richards

Hearing start date

26 November 2024

Hearing finish date

27 November 2024