Director’s duty of care – Ostensible Authority – the “Duomatic principle”
The Privy Council decision Ciban Management v Citco (BVI) Ltd (the “Appeal”) brings the doctrine of ostensible authority into sharp focus and highlights the extent of the duty of care owed by corporate directors and registered agents to BVI incorporated companies.
In the Appeal, which was given on 30 July 2020, Ciban Management Corporation (previously named Spectacular Holdings Inc.) (the “Company”/ “Spectacular”) sought to overturn the EC Court of Appeal finding that there was no breach of the tortious duty of care owed by Citco BVI Ltd. (“Citco”) and Tortola Corporation Company Ltd. (“TCCL”) in issuing a power of attorney on behalf of Spectacular on 15 August 2001 (the “Fifth POA”). Citco was the former registered agent and TCCL was the sole director of the Company. Spectacular was also alleging that Citco and TCCL acted in breach of their duty of care by issuing the Fifth POA in relation to section 80 of the International Business Companies Act 1984 (BVI) (“IBC Act”).
Spectacular’s ultimate beneficial owner (the “UBO”) was a Brazilian businessman, Mr. Alberto Jackson Byington Neto (“Mr. Byington”), who acquired the Company for the purpose of conducting an elaborate scheme which required his interest in the Company to remain anonymous. Mr. Byington had sought the assistance of longstanding friend and associate Mr. Henrique de Moura Costa (“Mr. Costa”) in the acquisition of Spectacular, whereby TCCL was appointed as its sole director. Spectacular’s sole purpose was to act as a holding company for five parcels of land (the “Property”). The share capital of the Company consisted of 5,000 bearer shares held by Florida-based attorney Mr. Stollman on behalf of Mr. Byington.
The Powers of Attorney
Between 1997 and September 1999, Spectacular issued four powers of attorney authorizing Mr. Delollo (“Mr. Delollo”), a Brazil-based lawyer, to carry out specific acts on its behalf. Each power of attorney was issued on the instructions of Mr. Costa directly to Citco or to Citco Corporate Services Inc. based in New York. At each relevant time, Mr. Costa’s instructions were followed without fail and the respective powers of attorney were issued by TCCL as director. It is important to note that Mr. Byington had given his approval for each of the corporate acts carried out by Spectacular in accordance with each of the four powers of attorney.