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Food For Thought: Did the Privy Council get it wrong in Nilon? The BVI needs a one-stop-shop for rectification claims

Rectifying claims? Here's a list of things to look out for while doing these things

1. In the Privy Council case of Nilon Limited and another v Royal Westminster Investments S.A. [2015] UKPC2 the question was whether a claimant could bring proceedings for rectification of the share register of a BVI company in the BVI Court, when the reason for rectification was an untried allegation that a defendant had agreed to allot shares in the BVI company to the claimant; and if so, whether the defendant  was a necessary and proper party to the claim and whether the BVI is an appropriate forum.

2. It had previously been understood that where a dispute arose as to the legal ownership of BVI shares, a rectification claim could be brought in the BVI to determine the issue, and the BVI would naturally be the appropriate forum. Usually, the filing of the fixed date claim form (akin to an English CPR Part 8 or an old style originating summons), exposed a dispute as to the beneficial ownership, which led to a trial with case management directions by the BVI Court for pleadings, disclosure and oral evidence.

3. The question as to the ownership of BVI shares, in a BVI company, a matter of BVI law, was naturally dealt with in the BVI Court. However, it was held by Lord Collins (para 51) that “proceedings for rectification can only be brought where the applicant has a right to registration by virtue of a valid transfer of legal title, and not merely a prospective claim against the company dependent on the conversion of an equitable right to a legal title by an order for specific performance of a contract”. The consequence was that such claims could no longer easily be brought in the BVI, until the earlier threshold question of the equitable right had been determined. The test for service out of the jurisdiction against the transferor is dependent on a valid claim existing against the subject BVI company.

4. Could the BVI legislature simply legislate to say that rectification claims are nimble claims capable of leading to a fully pleaded trial, determining beneficial title, rather than merely a matter of form in bluntly unhelpful summary proceedings? It would certainly make sense to litigants who regret having to claim a right in one jurisdiction (e.g. where a fraudulent transferor is located) and then having to claim in a second jurisdiction, the BVI, for the further right to rectify the register.

 

Examining Nilon

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