Conyers represented successful Claimants before the BVI Commercial Court in Claim No. BVIHC (COM) 2017/086 King Bun Limited and Others v. Lau Man Sang, James and Others in recently obtaining a final judgment for payment of equitable compensation in the sum of US$55,730,000 (approx. HK$435,000,000), pre-judgment compound interest in the sum of US$41,144,556.37 and an order for interim payment of costs in the sum of US$495,000. This resounding victory on 14 November 2023 brought to an end the quantum phase of a split trial concluding a bitterly contested derivative action brought by the minority shareholders for breach of duties against the directors of Vanway International Group Limited (“Vanway”).
In August 2021, the BVI Commercial Court handed down judgment on liability in favour of the Claimants against seven directors of Vanway for carrying out a fraud on the minority shareholders, in selling the assets of Vanway to the Chairman of the Board and First Defendant at a gross undervalue of HK$6,000,000. Following the trial on liability, the Court held that the sale was in breach of the directors’ statutory duties under sections 120 to 122 and section 175 of the BVI Business Companies Act and in breach of fiduciary duties of fidelity and good faith.
At the recently concluded trial on quantum and relief, the Court heard and accepted the Claimants’ expert evidence valuing Vanway’s assets conservatively at approximately HK$441,000,000 at the time of the unlawful sale in September 2015. The Court also accepted the Claimants’ invitation to draw adverse inferences against the defendants for serial non-compliance with their disclosure obligations and awarded pre-judgment interest at a rate of 7% compounded annually given the extended period over which Vanway had been kept out of its assets.
Notably, this is the first known Commercial Court matter in which the BVI Court has awarded relief under section 184E(d) of the BVI Business Companies Act, ordering direct payment of compensation (in part) to the shareholders in a derivative action, instead of wholly to the company. In this case, the Court ordered payment of equitable compensation in the sum of US$7,430,000 and pre-judgment interest of US$5,484,569.36 directly to the Claimants (commensurate with their collective 13.33% shareholding in Vanway). This rare and pragmatic statutory remedy is very beneficial to minority shareholders seeking timely relief and ultimately enhances the prospects of successful enforcement directly against rogue director defendants. This BVI remedy is tailor-made to avoid the otherwise circular and counterproductive payment of damages to a company which remains controlled by directors and majority shareholders held to have committed a “fraud on the minority”.
The Claimants’ legal team was led by Jern-Fei Ng KC of 7BR Chambers supported by James Bailey of 7 King’s Bench Walk, alongside Conyers’ cross-border disputes team comprising Partners Jerry Samuel and Norman Hau, Counsel Alecia Johns and Associate Catherine Wong. Ben Johnson of FTI Consulting was instructed as the Claimants’ independent valuation expert.
Conyers is pleased that its clients achieved this well-deserved victory.
This article is not intended to be a substitute for legal advice or a legal opinion. It deals in broad terms only and is intended to merely provide a brief overview and give general information.