Company Law

Chang Sing Chung v Kim Koon and ors (MC 4 of 2020) [2022] SCSC 803 (19 September 2022);

Fabianna Savy — Thu, 19 Jan 2023 05:06:50 +0000

Chang Sing Chung v Kim Koon and ors (MC 4 of 2020) [2022] SCSC 803 (19 September 2022);

Flynote

Fabianna Savy Thu, 01/19/2023 - 05:06

Search summary

Petitioner under Section 102 of the Companies Act; oppression of shareholders; setting off of dividend against fictitious company loan; Petition granted

Headnote and holding

ORDER

The 3^rd Respondent shall cancel all reference to any alleged loan agreements in the records and books of the 3^rd Respondent in regards to school fees paid to the Petitioner and that of other shareholders in the period of September 1981 to 1994 by the 3^rd Respondent;
The 3^rd shall refund to the Petitioner the total sum of dividends that has been withheld and set off against the school fees gifted to the Petitioner and that of any other shareholders. The sum withheld for the Petitioner amounts to Rs 905,958.20.
The 1^stand 2^nd Respondent shall jointly and severally pay to the Petitioner the sum of RS 200,000.
The above refunds of the dividend shall be effected with interest at commercial rates continuing until full payment of all sums claimed with effect from the date of the first deductions made from the due dividends.
The Petitioner shall be entitled to cost of these proceeding

R GOVINDEN, CJ

The Pleadings

The Petitioner avers in her Petition that she is an employee and a shareholder of Kim Koon & Co (Pty) Ltd a minority shareholder of the 3^rd Respondent in which she holds 10.22% of the shares. The remainder of the shares of the 3^rd Respondent are held by 1^st and 2^nd Respondent who are the registered Directors of the 3^rd Respondent. Other share are also held by the heirs Kamline Kim Koon, Shiokline Kim Koon, Towline Kim Koon, Miyive Kim Koon, Choung Yive Kim Koon, Semline KimKoon, Kamline, Sionline Kim Koon, Kamline Kim Koon and Shiokline Kim Koon.
The 3^rd Respondent carries on business as an importer and general merchant. The 1^st and 2^nd Respondent have for several years been deducting a sum of money from the dividends, payable to the Petitioner by the 3^rd Respondent, as school fees repayments for the education of her children in a manner which has never been formally approved or authorised by the Company at any general meeting or at all.
The late Mr J. R Kim Koon the founder of the 3^rd Respondent, herein after also referred to as” the founder” had always wanted his grandchildren to have a good education so he arranged payment for covering their school fees but he never associated such payments from the business of the 3^rd Respondent as being a loan to the recipients.
Mr Kameline Lee Kim Koon one of the former shareholders and directors of the 3^rd Respondent passed away in 2002. Following this death, the Company, under the stewardship of the 1^st Respondent, activated a loan repayment mechanism for the school fees and the Petitioner has with some shareholders been made the target of a repayment of school fees arrangement until this day.
The loan repayment arrangement above mentioned commenced on or about the year 2003 when the 1^st Respondent took charge as the Director of the Company. He started charging the Petitioner and two other siblings to pay back school fees despite not having a loan agreement to back up the unlawful retention and withdrawal of divided payments due to these members of the company. It only came about to the Petitioner’s attention on the 12^th October 2004 when she received a copy of the financial statement dated year end 31^ST December 2003.
The said 1^st Respondent has exempted one of the siblings from paying back the school fees.
Whenever a dividend is declared the Petitioner does not receive anything but instead the Company offsets it from the alleged school fees that it allegedly owed to the Company.
The Petitioner goes on to aver that this unlawful retention of funds due to her has now reached the sums set out in the attached breakdown in the schedule and that the said retention is fraudulent and without legal foundation or substance. The Schedule is as follows:

BREAKDOWN OF FUNDS RETAINED

The amounts owing to my client set out in the table below. These monies include but not limited to the following:

DATE	DETAILS	AMOUNTS OWED TO ME
18 December 2006	Compensation payment for retirement	Rs47,192.31
Year ended 31 December 2007	Dividends declared (Rs50,000)	Rs5,111
Year ended 31 December 2008	Dividends declared (Rs202,500)	Rs20,700
Year ended 31 December 2009	Dividends declared (Rs1,012,500)	Rs103,500
2012	Father’s bank account	Rs60,033.33
13 May 2016	Closure of Kiu On	Rs16,000
12 January 2017	Jersey Bank Account	USD10,950
21 February 2017	Jersey Bank Account	GBP2,770.42
3 August 2017	Jersey Bank Account	USD15,637.22
Year ended 31 December 2017	Amount credited to the alleged loan account	Rs411,763.00
12 December 2019	Marc Kim Koon Share distribution	Rs234,389.33

The Petitioner avers further that she has tried to resolve the matter without having to seek the legal route by amicable settlement and discussion. However, these attempts have yielded no results. She also avers that to date, she has not received any response from the Respondents regarding this matter despite having voiced her disagreement personally and through her proxies and finally by a letter of 9 October 2019. The Petitioner also avers that it was agreed, at the last AGM held on 22 December 2018, that there was no loan agreement in the first place.
She further avers that as a result of the unfair, oppressive and fraudulent nature of the actions of the 1^st and 2^nd Respondents jointly and severally in retaining dividends due to her and nor responding to her requests she is forced to proceed with taking legal action against the Respondents. As a result of this it is claimed that the 1^st and 2^nd Respondents have acted in breach of their duties as Directors of the 3^rd Respondent and as a result thereof she has suffered loss and damages as set out and tabulated in the attached Schedule which the Respondents are bound to make good jointly and severally.
Accordingly, with immediate effect she request that the alleged loan agreement for the school fees waived and nullified. Moreover, she asks that all the dividends and other funds used to set off against the school fees be refunded back to her with interest at commercial rates from the date of the first deduction from dividend payment until to date.
She finally request that this court orders the Respondents to jointly and severally:-

Regularise all the matters set out in the Petition at the expense of the Respondents and a refund of all the funds deducted from the dividends due;

Cancel all reference to any alleged loan agreement in the records and books of the 3^rd Respondent as a result of the regularisation above and to enter correct records of the dividends due to the Petitioner;

To pay damages to the Petitioner in the capital sum of Rs 200,000;

To pay the Petitioner all the above with interest at commercial rates continuing until full payment of all sums claimed with effect from the date of the first deductions made from the due dividends;

To pay the costs of this suit.

The Petition is supported by the affidavit of the Petitioner.
In their answer to the Petition, the Respondents do not dispute the different shareholdings of the parties in the Respondent Company.
The 3^rd Respondent goes on to admit that the 1^st and 2^nd Respondents have been, for several years, deducting a sum of money from dividends payable to the Petitioner as school fees repayments for the education of their children. However, they aver that it was approved to deduct a sum of money from the dividend payable to shareholders who were lent money to pay for the education of their children.
The Respondents refute the averments in the Petition regarding the altruistic intention of the late Mr J. R . Lee Kim Koon towards his grandchildren. They aver instead, that whether or not the late Mr. J. R. Lee Kim Koon wanted his grandchildren to have a good education, the use of company assets cannot be used for payment of private purposes.
Regarding the alleged change of circumstances following the death of Mr Kameline Lee Kim Koon, the activation of the loan repayment mechanism for the school fees and the targeting of the Petitioner and other shareholders, the Respondents aver that that the Petitioner and three other shareholders were not ‘made the target’ but they were asked to reimburse the money used to send their children overseas. They aver further that it was discussed at the Annual General Meeting on the 3^rd August 2022 that the auditors would revert on the authority given by the late J. R. Lee Kim Koon as to the charging of school fees to current accounts.
The Respondents deny the averments that the 1^st Respondent took charge of the affairs of the Company and started to charge the Petitioner and two other siblings to pay the school fees back despite having no loan agreements and the fact that she came to know his intention but on the 12^th October 2004. Moreover, and due to the close relationship of the parties, the agreements to be in writing are exempted. The 1^st Respondent was notified that school fees are not an allowable expense and he sought to rectify this. It is his contention that upon receiving such advice, he proceeded to act in the best interest of the company.
The Respondents aver that contrary to the Petitioner’s averments, all the siblings have paid back the 3^rd Respondent all the monies used to pay for the education of their children.
The Respondents agree that whenever a dividend is declared, the Petitioner does not receive anything. According to them, this because the Petitioner has refused to pay the money used to pay for the education of her children for the Company to offset the dividend to complete paying he school fees that she owes the 3^rd Respondent.
The Respondents dispute the content of the Petitioner’s attached breakdown. According to them the Jersey Bank Account on 12 January 2017 of US$10, 950, 21 February 2017 of £2,770.42 and 3 August 2017 of US$15,637.22 – the total amount when converted to Seychelles is equivalent to SCR 411,763. According to them the amount in the schedule in the table ‘year ended 31 December 2017’ is not a separate amount and is not any monies owed to the Petitioner. They aver that the 3^rd Respondent through its Directors are rectifying the situation where monies were illegally removed as the Petitioner refused to return the money.
The Respondents deny that the Petitioner has attempted to resolve the matter amicably and that no responses have been received in respect of her queries. In answer they aver that their legal counsel have sought to explain the matter to the Petitioner as to the reason why the amount was being deducted.
The Respondents deny any illegality, fraud and oppression on their part. They aver that the action of the 1^st and 2^nd Respondents do not constitute fraud as their action had no intention to deceive nor was there a material factor present consisting of contrivances, false allegations or the withholding of information.
The 1^st and 2^nd Respondents deny breaching their Director’s duties and aver that the 1^st Respondent as Managing Director was acting the best interest of the 3^rd Respondent and was abiding to the memorandum and articles of association.
The Respondents finally deny the prayers of the Petition. Instead, they aver that the Petitioner received funds from the 3^rd Respondent and that she should refund the amount owed.

The law

This Petition is filed under the provisions of Section 201 of the Companies Act 1972, Section 201 (1) and (2) are as follows;

Protection of minority shareholders

201. (1) Any shareholder of a company who complains that the affairs of the company are being conducted in a manner which is oppressive or .unfairly prejudicial to some part of the share holders (including himself) or, in a case falling within section 190(3), the Registrar, may make an application by way of petition to the court for an order under this section.

(2) If on the hearing of the application the court is satisfied either:

(a) that the applicant, either alone or together with other shareholders, has been treated oppressively in one or more respects over a period of time, or that action has been taken by the persons who are or were in control of the affairs of the company, being action which was known by them to be likely to prejudice unfairly the interests of the applicant, either alone or together with other shareholders; or

the court may, with a view to bringing to an end or remedying the matters complained of, make such order as it thinks fit, whether for regulating the conduct of the company's affairs in future, or for the purchase of the shares of any shareholders of the company by other shareholders of the company or for the acquisition of any such shares by the company and, in the case of such an acquisition by the company, for the reduction accordingly of the company's capital, or otherwise.

(3) Without prejudice to the generality of its powers under the last foregoing subsection, the court may order that:

(a) an action or other proceeding shall be brought in the company's name and conducted by any person (including the Registrar) appointed by the court;

(b) a director, managing director or other officer or an auditor of the company shall be removed from any office, appointment or employment held by him under the company or its holding company or subsidiary, and that some other person nominated or approved by the court shall be appointed to any such office, appointment or employment in his place;

(c) any person shall be appointed to be a director or managing director of the company or of its holding company or subsidiary on such terms and condition as the court thinks fit;

(d) a dividend shall be paid by the company to shareholders or any class of shareholders of the company or by a subsidiary of the company to the company;

(e) any person shall pay damages or compensation to the company or to the applicant for any loss suffered in consequence of that person's misconduct or breach of duty.

Admitted facts

I expressed my appreciation for the conduct of this civil case by way of admitted facts which had been worked out by the parties and presented to the court this has clearly narrowed down the issue for determination. The joint statement of admitted facts which were produced by the parties and have been admitted in evidence. It is as follows;

Agreed Facts

The Company (3rd Respondent) was incorporated in 1959, carries out the business as Importers and General Merchant.

The shareholders in the company are:

Heirs of Kamline Lee Kim Koon
Heirs of Shiookline Lee Kim Koon
Miyive Lee Kim Koon
Manyive Lee Kim Koon
Filine Lee Kim Koon
Niatline Lee Kim Koon
Sionline Lee Kim Koon
Semline Lee Kim Koon
Choung Yive Lee Kim Koon
Pit Kim Lee Kim Koon (Wife of Kamline)
Ah Yen Lee Kim Koon (Wife of Shiookline)

The Directors at that time were:

JR Lee Kim Koon
Kamline Lee Kim Koon
Shiookline Lee Kim Koon
Filine Lee Kim Koon
Niatline Lee Kim Koon

Directors who managed the company have changed over time, and it is significant that measures taken which are subject of this suit were executed after the passing of the principal founders JR Lee Kim Koon and Kamline Lee Kim Koon.

The main issues are whether the school fees money from JR Lee Kim Koon given to the Petitioner as a family support (gift) should be repaid and whether each and every dividend and payment unlawfully withheld from the Petitioner (totaling SCR 905,958.20) are owed by the Company to the Petitioner. This is disputed by the Respondents and allege that the school expenses were a loan. Petitioner also wants the court to look at all moneys coming from JR Lee Kim Koon to be put into the pot for consideration including all gifts, donations and financial assistance to all children and grandchildren without exception.

The Petitioner alleges that in 1981, JR Lee Kim Koon (the founder of the 3rd Respondent) wanted to support his grandchildren financially as he always wanted his grandchildren to have a good education. JR Lee Kim Koon financed many things for his family including the education abroad of various grandchildren. The school fees were paid to the respective families from around September 1981 to 1994.

The grandchildren who benefitted were:

Norbert, Jennifer and Doreen Chan Sing Chung, 3 children of Manyive Chan Sing Chung
Frankie and Cynthia Tsang Wing, 2 children of Miyive Tsang Wing
Shirley, John and Sandy Lee Kim Koon 3 children of Shiookline Lee Kim Koon
Allen and Vincent Lee Kim Koon, the 2 adopted children of Kamline Lee Kim Koon

JR Lee Kim Koon also assisted others in his family including his children as per the attached schedule over a period of over 30 years during approximately the late 1960s to 1994 using funds from various sources but mainly from the Company to finance several contributions he made for his children and others. None of these funds have been repaid or returned to JR Lee Kim Koon personally or to the company account.

JR Lee Kim Koon managed the company from its incorporation and was assisted by other directors and non-directors later on. It was JR Lee Kim Koon who had authority to manage and run the company and was the sole signatory for cheques.

At the time of the death of JR Lee Kim Koon, Kamline Lee Kim Koon took over to manage the company from 1995-2002. In 2002, Kamline Lee Kim Koon passed away and the 1st Respondent took over managing the company until present.

It was on the 8th August 2002, the 1st Respondent was made aware by the 3rd Respondent’s auditor, Mr Richardson through a letter, that “school fees have always been charged to the directors/family current accounts. It has been like that since 1981. The accounts were approved by Tai Tai (Kamline Lee Kim Koon), your father and yourself (1^st Respondent).”

Mr Richardson states in the letter: “school fees is not an allowable expense for tax purposes and is not in our view, an expense which should be borne by the company”.

Mr Richardson has made no statement about any other funds credited to the company account or of any loan agreements or who was liable to repay these sums allegedly taken from the company by JR Lee Kim Koon including funds used to pay for his own children’s purchase of property or education.

It is upon learning about this, that the 1st Respondent started regularizing this matter. This was discussed at the Annual General Meeting held on 12 July 2003 (Exhibit 7) where “the question of debt balances on current accounts arising though charges of school fees and other items were discussed. It was agreed to give some thought to regularizing the situation.”

The Petitioner enquires whether the regularization should have been applied to the directors accounts rather than to the shareholders?

The 1979 financial statements shows the various credit balances of the shareholders and directors.

Name

Amount/Balance at 31.12.1979

Shiookline Lee Kim Koon

SCR 277,769

Niatline Lee Kim Koon

SCR 267,734

Filine Lee Kim Koon

SCR 193,676

Kamline Lee Kim Koon

SCR 438,264

Chung Yive Kim Koon

SCR 153, 016

Manyive Kim Koon

SCR 265, 784

Miyive Kim Koon

SCR 282,563

Marc Kim Koon

SCR 244,240

Sionline Kim Koon

SCR 149,253

Semline Kim Koon

SCR 30,329

Page 9 of the 2001 Financial Statement shows those who had credit balance:

Name

Amount/Balance at 31.12.2001

Shiookline Kim Koon

SCR 137,287.00

Niatline Kim Koon

SCR 643, 871.00

Filine Kim Koon

SCR 593, 460.00

Debtors

Balance at 31.12.2001

The heirs of Kamline Lee Kim Koon: in the sum of SCR 229, 152

Miyive Lee Kim Koon- SCR 360, 126

Manyive Lee Kim Koon- SCR 758,204

The Credit balance for the other shareholders for 31.12.2001

Chung Yive Lee Kim Koon

SCR 360, 829

Marc Lee Kim Koon

SCR 533,662

Sionline Lee Kim Koon

SCR 141,848

Semline Lee Kim Koon

SCR 316,903

It was in 2006, four years after the 1st Respondent claims to have detected the issue of school payments which happened more than 12 years ago i.e. between 1981 to 1994, that he created the loan repayment mechanism despite the school fees money being a gift and the expiration of the option for a legal claim by the Respondents.

Petitioner objected to this loan repayment mechanism because JR Lee Kim Koon as promised, provided payment of school fees to her as a gift and therefore she should not refund any money. 1st Respondent responded that the money used was a loan as company funds should not be used for private purposes. 1st Respondent in unable to present a loan agreement. The 1st Respondent further responded that he was acting in the best interest of the company. Since then, Petitioner has constantly addressed this issue and has been continuously ignored to this day whilst 1st Respondent retained all payments whether associated with the finances of the company or not and dividends legally due to her in her capacity as a shareholder of the company/companies without her consent and against her objections.

Name of shareholder:	Manyive	Heirs of Kamline	Miyive	Heirs of Shiookline
2006	SCR 47,192 *payment withheld from Petitioner	-	-	-
Year: 2007	SCR 5,111 * payment/dividends withheld from Petitioner	SCR 5,111	SCR 5,111
Year: 2008	SCR 18,400 * payment/dividends withheld from Petitioner	SCR 18,400	SCR 18,400
2009	SCR 62,501 * payment/dividends withheld from Petitioner	SCR 103,500	SCR 103,500
2010	SCR 12,000 * added as a debt to the Petitioner
2011	SCR 12,000 * added as a debt to the Petitioner	-	SCR 233,115
2012	SCR 48,033 * payment/dividends withheld from Petitioner	SCR 16,726
2013
2014
2015
2016
2017
2018	SCR 411,763 *payment withheld from Petitioner
2019

Queries to the 1^st Respondent regarding the above table and respective financial statements:

Year 2008 where it is stated SCR18,400, dividends were declared (SCR 202,500). There are 225 shares in total and Manyive has 23 shares. Therefore, the correct amount owed to the Petitioner should be SCR 202,500/225 = SCR 900 per share x 23 = SCR 20,700.00

In year 2009 where it is stated Rs62,501, dividends were declared. The other two shareholders who has the same number of shares as the Petitioner received Rs103,500.00. Therefore, the correct amount owed to the Petitioner should be Rs103,500.00.

The Petitioner alleges that the FS shows that SCR12,000.00 was charged to the alleged school fees loan in 2010 and 2011, respectively. The Respondents have deducted this sum as contribution for meals. The Petitioner confirmed that she has already paid for meal contributions up till 2014 when the meals stopped. This should be rectified by the Respondents.

What was the SCR 48,033.00 that was deducted in 2012? The Petitioner requests that Respondents clarify this by providing further details and source of this amount.

Please note that the following amounts are missing from the above table and the respective financial statements:

2012 Father's (JR Lee Kim Koon) credit balance SCR 60,033.33 - (This was confirmed by Elizabeth Lee Kim Koon (1^st Respondent’s wife) and 1st Respondent);
13 May 2016 Closure of Kiu On SCR 16,000.00 - (This was confirmed by Chung Yive Lee Kim Koon (Jeanette), a shareholder of the 3^rd Respondent, Elizabeth Lee Kim Koon and 1st Respondent); and
12 December 2019 - Marc Lee Kim Koon Share Rs234,389.33

The Petitioner avers it is unlawful to withhold payments and dividends rightfully due to her; Respondents alleges these were Company funds and the other shareholders paid back their loans. Respondents cannot provide agreements, receipts or any other proof to support their claims. This is disputed by Petitioner who claims one of the siblings, Shiookline Lee Kim Koon has been exempted from paying. The Respondents state that no sibling has been exempted. Shiookline Lee Kim Koon had a credit balance which was used to offset the payment of the school fees. Disputed by Petitioner with proof emanating from 1st Respondent’s admission to Lisa Chan Sing Chung (daughter of the Petitioner) (exhibit 21) and Ah Yen aka Marie-Rose Lee Kim Koon (Shiookline’s widow) admitted to the Petitioner that they did not pay back the school fees.

FS 2017 and 2018, (see below table for a simplified summary) conclusion is Respondent stated Shiookline has repaid fully and has a credit balance of SCR 84,844. It is very hard to believe that SCR 52,443 was the amount that needed to be repaid for school fees? That is GBP 2550 (current exchange rate) for the school fees of 3 children from 1981 to 1994.

Shiookline KK and Heirs of Shiookline KK

Year	Amount in credit (SCR)
31 Dec 1979	277,769
31 Dec 2001	137,287
31 Dec 2002	137,287
31 Dec 2003	137,287
31 Dec 2004	137,287
31 Dec 2005	137,287
31 Dec 2006	0 (137,287 was deducted from Shiookline’s account and put in Heirs Shiookline KK)
31 Dec 2007	137,287 – 50,043
31 Dec 2008	87,244 – 2,400
31 Dec 2009	84,844
31 Dec 2010	84,844
31 Dec 2011	84,844
31 Dec 2012	84,844
31 Dec 2015	84,844
31 Dec 2016	84,844
31 Dec 2017	84,844
31 Dec 2018	84,844

After years of unsuccessful approaches by Petitioner, Respondents ignored her request and continue to retain payments and dividends rightfully due to her. They are applying a right of set-off to withhold the payments and dividends.

Petitioner alleges the school fees J R Lee Kim Koon paid for her children was an unconditional gift; she accepted in good faith with no obligation to repay. Accordingly, there is no agreement or debt between Petitioner and Respondents and so the right of setoff does not arise. The Respondents have stated that in such family matters, there will be no such loan agreement. Petitioner is very concerned about such a statement from the Respondents as directors of a company that “family matters” do not require a contract, since it highly represents their ongoing business practice and conduct and it may be a reason why the Respondents are unresponsive to repeated questions about observations made on the 2017 and 2018 financial statements (exhibit 41).

Petitioner brings this action on the basis the actions of Respondents or some of the Respondents are unfair oppressive and fraudulent in nature and amounts to a breach of directors’ duties against the shareholders of 3rd Respondent and requests for SCR 905,958.20 that the respondents have retained so far to be paid to her.

Petitioner also claims SCR 200,000 for damages and costs of this suit. In addition, Petitioner requests for interests at commercial rates for each withheld dividends and other amounts since their respective effective date stipulated in the table below until the full payment of the same have been paid to her.

*Effective Date*	*Details*	*Amounts owed (SCR)*
18 Dec 2006	Compensation payment for retirement	54,461.54
Year ended 31 Dec 2007	Dividends declared (SCR 50,000)	5,111.00
Year ended 31 Dec 2008	Dividends declared (SCR 202,500)	20,700.00
Year ended 31 Dec 2009	Dividends declared (SCR 1,012,500)	103,500.00
2012	Father’s credit balance	60,033.33
13 May 2016	Closure of KiuOn	16,000.00
12 Jan 2017	Amount credited to the alleged loan account (financial statement for year ended 31 December 2017)	411,763.00
12 Dec 2019	Marc Lee Kim Koon Share distribution	234,389.33
*Total :*		*905,958.20*

Respondents dispute they have breached their duties as directors and 1st Respondent says he has acted in the best interests of the Company as Managing director (a post that does not exist under the Companies Act 1972) and does not owe Petitioner any money since this claim relates to monies due to 3rd Respondent which was given by way of loan in the first place.

Analysis and determination

The court’s decision would be based on the facts as admitted by the parties before the court and nothing else. In a bid to assist the court to address the issues arising and in contention between the parties, the Petitioner and the Respondents have filed a list of issues left for determination by the court. I have scrutinised the said list and I find that indeed they properly and appropriately deal with the issues that is now left for the court determination and therefore they shall be the questions that I should seek to answer in resolving this case. The answer to these questions would ultimately answer the legal question paused by the Petition, namely whether the Petitioner being a shareholder of the 3^rd Respondent has established that the affairs of the 3^rd Respondent was conducted in a manner which is oppressive or unfairly prejudicial to some part of its shareholders. The factual issues are as follows:

Was JR Lee Kim Koon (grandfather), the founder of the 3^rd Respondent (Kim Koon Company) from 1959 to 1995, correct to use funds belonging to 3^rd Respondent for education for several of his children and grandchildren?

If the money expended in paragraph 1 was meant to be a gift for the beneficiaries of the above gift/donations, should this money or any part of it be repayable to the 3rd Respondent, if so by whom?

Should the money expended in paragraph 1 be reimbursed to 3rd Respondent, if so by whom?

If there was an obligation to repay the money expended in paragraph 1 by any of the beneficiaries, is the claim maintainable in favor of the 3^rd Respondent?

On which legal basis did the 1^st Respondent create a school fee loan repayment mechanism for the Petitioner setting them off from dividends and payments due to shareholders?

What part of the Companies Act or any Seychelles law entitled the 1^st Respondent to justify the above-mentioned measures in paragraph 5?

If the court decides that the withheld dividends and payments are to be reimbursed to the Petitioner, what remedy is the Petitioner entitled to?

The Respondents submitted that the 3rd Respondent was incorporated in 1959 and deemed incorporated under the Companies Act 1972. That it carries business as importers and General Merchants. The learned Counsel for the Petitioner submitted that the Respondent was incorporated without Articles of Association, the Company and that therefore it stands to be governed by the Articles of Association in Part ii of the First Schedule to the Act of the Act. These submission are not contested in this case. The court therefore finds that the scheduled Article of Association is the Constitution of the 3^rd Respondent in accordance with the provisions of Section 8 of the Companies Act which reads as follows;

8 Statutory regulations

If a company is incorporated without articles being registered, or if articles are registered but do not exclude the regulations set out in Part II of the First Schedule to this Ordinance, or in the case of a proprietary company, in Part IV of the said Schedule, those regulations shall, insofar as the registered articles do not exclude or modify them or make express provision for the same matter, be the regulations of the company in the same manner and to the same extent as if they were contained in duly registered articles.

In the Articles of Association of the 3^rd Respondent Clause 50 relating to powers and duties of Directors and clause 74 and 75 have special importance given the facts of this case. They read as follows;

“50. The business of the company shall be managed by the directors, who may pay all expenses incurred in promoting and registering the company, and may exercise all such powers of the company as are not, by the Ordinance or by these regulations, required to be exercised by the company in general meeting, subject, nevertheless, to any of these regulations, to the provisions of the Ordinance and to such directions, being not inconsistent with the aforesaid regulations or provisions, as may be given by the company in general meeting; but no direction given by the company in general meeting shall invalidate any prior act of the directors which would have been valid if that direction had not been given.

74. Subject to the provisions of the Ordinance, the directors may from time to time appoint one or more of their body to the office of managing director for such period and on such terms as they think fit, and, subject to the terms of any agreement entered into in any particular case, may revoke such appointment. A managing director whose appointment is approved by a general meeting passed not later than six months after his appointment shall not, whilst holding that office, be subject to retirement by rotation or be taken into account in determining the rotation of retirement of directors, but his appointment shall be automatically determined if he ceases from any cause to be a director.

75. The directors may entrust to and confer upon a managing director any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit, and may from time to time revoke, withdraw, alter or vary all or any of such powers.”

It is not part of the case of either parties that the founder of the 3^rd Respondent abused his powers of Directorship of the Company. In fact both parties are in agreement that the founder acted benevolently, in good faith and at all material times in the best interest of the Company and in accordance with the Companies Memorandum of Association.

JR Lee Kim Koon was the founder of the 3^rd Respondent and Director who managed the day to day affairs of the 3^rd Respondent during his life time. The overall sense of control over the affairs of the Company before his death is an accepted fact in this case and both parties have admitted that JR Lee Kim Koon managed the company from its incorporation and was assisted by other directors and non-directors later on. It was JR Lee Kim Koon who had the full authority to manage and run the company and was the sole signatory for cheques.

As per the facts of this case the grandchildren who benefited from the financial assistance their grandfather benefitted included Norbert, Jennifer and Doreen Chan Sing Chung, three children of Manyive Chan Sing Chung, the Petitioner. The rest of the beneficiaries are the children of three siblings Miyive Tsang Wing, Shiookline Lee Kim Koon and Kamline Lee Kim Koon. It is also accepted that JR Lee Kim Koon also assisted others in his family including his children for over a period of over 30 years during approximately the late 1960s to 1994 using funds from various sources but mainly from the Company to finance several contributions he made for his children and others. None of these funds have been repaid or returned to JR Lee Kim Koon personally or to the company account.

Being such an altruistic grandfather, I find that there was nothing wrong for him to decide to fund his grandchildren’s education. Having taken that decision, he could have sourced the funds either from his personal account or from the account of the 3^rd Defendant provided that he did so in accordance with the Memorandum of Association and the provisions of the Companies Act aforementioned. There is no suggestion that the founder unlawfully exercised his powers as Director of the 3^rd Respondent or that there were challenges or contest by other Directors or shareholders of the 3^rd Respondent during the period that the funding took place by way of disbursement of funds belonging to the 3^rd Respondent.

In fact the facts shows that on the 8^th August 2002, the 1^st Respondent was made aware by the 3rd Respondent’s auditor, Mr Richardson through a letter that “school fees have always been charged to the directors/family current accounts. It has been like that since 1981. The accounts were approved by Tai Tai (Kamline Lee Kim Koon), your father and yourself (1^st Respondent).” In the view of this court this means that the 1^st Respondent, as Director, had actually given his approval in resolutions in accordance with the law the distribution of the funds in accordance with the will of the founder. There were no contest of the merits of the distributions.

The contest came much later and ex post facto the initial disbursement of the fees. Mr Richardson in his letter stated: “school fees is not an allowable expense for tax purposes and is not in our view, an expense which should be borne by the company”. It is upon learning about this, that the 1^st Respondent started “regularizing” this matter. This was then discussed at the Annual General Meeting held on 12 July 2003 (Exhibit 7) where “the question of debt balances on current accounts arising though charges of school fees” and other items were discussed. It was agreed to “give some thought to regularizing the situation.”

To this court, the view of auditor is but an opinion of an auditor, acting as such and it carries little legal significance. The fact that the school fees are not allowable expenses could not have prevented or prohibited the 3^rd Respondent from lawfully paying the school fees, if all the legal prerequisite for the decisions to be effected were present. Which was the case here. Business tax is calculated on the basis of the taxpayer’s taxable income. The taxable income is calculated by deducting allowable business expenses for the income year from the total assessable income for that year. It is in this context that the auditor’s advice arises and should be taken. He was performing what his professional duty called for and advising the 3^rd Respondent that they could lessen the tax burden by stopping the payment as it was not allowable business expense. In other words he was simply giving a tax avoidance advice rather than an advice on the lawfulness of past transactions.

The next and most decisive question in this case is in what form did the education funding took. The Petitioner says that they were by way of a gifts and the Respondents argue to the contrary, and state that they were by way of loans. The court therefore needs to make a finding of fact and categorise what kind of contract was formed between the Petitioner and the 3^Rd Respondent as a result of the actions of the founder. Needless to say, this categorisation would obviously carry huge significant on the outcome of this case, for if they were gifts there would be no obligation for repayment and setting off of the payments against payments of dividends. If they were loans, the obligation for repayments will arise and the setting offs will be justified.

The legal regimes of our law relating to gifts and loans are contained in both the previous and current Civil Code of Seychelles. The new civil code came into operation on the 1^st of July 2020. This case was registered in January 2020 and the facts arising in it arose before the enactment of the new Code accordingly by virtue of the provisions of Section 31 (1) (a) and (b) of the Interpretation and General Provisions Act 1976 the provisions of the previous Code will apply. Notwithstanding this, I also note that former provisions are not dissimilar from the current ones.

The following are Articles of the Civil Code that have their application in this case. First, it is the applicability of Article 894 which states that:

Article 894

A gift inter vivos is an act whereby the donor irrevocably divests himself of the ownership of the thing in favour of a donee who accepts it.

The preceding Article 893 is also pertinent to draw in on, and it states that:

Article 893

A person may not make a disposition of property gratuitously otherwise than by a gift inter vivos or by will, and in the forms hereinafter established.

There is also Article 931 (1) and Article 932, which provide that:

Article 931

1. All documents creating a gift inter vivos shall be drawn up by notaries in the ordinary form of contracts; they shall keep the original, under penalty of nullity. This rule is of public policy and may not be excluded by the agreement of the parties.

Article 932

A gift inter vivos shall not be binding upon the donor and shall have no effect until accepted in express terms.

The acceptance may be made in the lifetime of the donor by a subsequent authentic document an original copy of which shall be kept by the notary; but the gift shall only have effect with regard to the donor as from the day that he receives notice of the document of acceptance.

In addition to the above, I find it important to draw on the following articles from the Civil Code:

Article 938

A gift duly accepted shall be perfect by the mere consent of the parties; and the ownership of things given shall be transferred to the donee without any delivery being required.

Article 953

A gift inter vivos may only be revoked by reason of the failure to fulfil the conditions subject to which it was made, by reason of ingratitude, or by reason of the subsequent birth of children.

On the other hand the loan which is claimed to exist by the Respondents in this case is a simple loan falling under Article 1895 and subsequent Articles of the Code. Article 1895 provides that:

The obligation which arises from a loan of money shall always be of the numerical sum referred to in the contract.

If there is an increase or a decrease in the value of his money before the time of payment, the debtor shall restore the numerical sum lent, and shall only restore that sum in money which is legal tender at the moment of payment.

This obligation shall not be construed as preventing the parties from agreeing to a readjustment of their monetary obligations by reference to some recognised index.

Similar to a gift inter vivos, there is no legal obligation as to the form of a loan agreement and the proof of both of those specific contracts would therefore be subject to the general law of evidence.

It is trite law that one who avers must prove his or her assertion. The court cannot conjure up figures from a few facts averred in a plaint and admitted by claimants and Respondents in court. The court relies on evidence and not averments to settle claims and in this case the evidence comes in the forms of the affidavits of the parties and the admitted facts which comes in the form of an aveu judiciare. The legal burden remains with the claimant throughout the trial to prove his case; on the party who affirms and not the party who denies it. However, this burden of proof may shift. The Roman maxim actor incumbit probatio or “he who avers must prove” applies. Similarly, article 1315 of the Seychelles Civil Code categorically states that “A person who demands the performance of an obligation shall be bound to prove it.” Accordingly, the Petitioner ought to prove the existence of a gift as she avers, and the Respondents to prove the existence of the loans as they aver.

A loan is when money is given to another party in exchange for repayment of the loan principal amount, plus interest. Hence, one main characteristic is the repayment of the loan amount. It was in 2006, four years after the 1st Respondent claims to have detected the issue of school payments which happened more than 12 years below, between 1981 to 1994, that he created the loan repayment mechanism despite the school fees money being a gift and the expiration of the option for a legal claim by the Respondents. The facts of this case shows that throughout the 12 years when the disbursement of the funds were made, there were no repayments of the funds either by the Petitioner or any of the siblings. From 1994 until the 1^st Respondent took the decision to effect the loan mechanism, not a single amount was repaid after he took over the management of the company. Mr Richardson the auditor could not show any repayment in his 2002 Report.

Another fact in this case is the lack of proof of any loan agreement or any other written documentation that would have at least amount to a beginning of proof in writing that the loan as it is being asserted existed .The loan appears to have been created ex post facto by the 1^st Respondent in a cost saving effort after the demised of the founder and upon being advised by the auditor. He may have done this in good faith and in the best interest of the 3^rd Respondent. However the facts remain that his decision cannot have retrospective effect on the decision of the founder and the 3^rd Respondent.

The Respondents argues that the lack of documentation regarding the loan agreement is due to the moral impossibility as a result of the close family ties, which creates a legal exception to the necessity for proof of the agreements or written proof of the agreement. Having gone over the facts of this case the court will not agree to this submission as I find that the lack of proof of the existence of the loan document in this case is not caused by the familiarity of the individuals concern but arises as a result of the total inexistence of such agreement whether in written or oral forms. There were no meetings of mind in that regard.

On the other hand, all indications is that what took place here is a gift inter vivos. The court finds that the facts of the case clearly revealed that there was an act whereby the donor, being the 3^rd Respondent, irrevocably divests itself of the ownership of the funds consisting of monies in favour of the donees, which included the Petitioner, who accepted it. This took place as a result of the benevolent nature and intent of the founder. This amounts to unconditional gifts for which there arose no obligation to repay and for which the right to set off does not arise as claimed and carried out by the 1^st and 2^nd Respondents.

This finding effectively determines all the list of issues left for the determination of this court.

As a result, this court finds that that 1^st and 2^nd Respondent have acted in a manner which is oppressive and unfairly prejudicial to some shareholders including the Petitioner. Indeed, the Petitioner has been treated oppressively since 2004 by being made to pay off a loan which never existed. I am further satisfied that the 1^st and 2^nd Respondents were aware that this seriously prejudiced the interests of the Petitioner and other shareholders. To this end, damage has been caused to the Petitioner, and the 1^st and 2^nd Respondent are personally liable.
Accordingly the court makes the following orders;
1. 1. 1. The 3^rd Respondent shall cancel all reference to any alleged loan agreements in the records and books of the 3^rd Respondent in regards to school fees paid to the Petitioner and that of other shareholders in the period of September 1981 to 1994 by the 3^rd Respondent;
    2. The 3^rd Respondent shall refund to the Petitioner the total sum of dividends that has been withheld and set off against the school fees gift of the Petitioner and that of any other shareholders. The sum withheld for the Petitioner amounts to SCR 905,958.20;
    3. The 1^stand 2^nd Respondent shall jointly and severally pay to the Petitioner the sum of SCR 200,000.
    4. The above refunds of the dividend shall be effected with interest at commercial rates continuing until full payment of all sums claimed with effect from the date of the first deductions made from the due dividends.
    5. The Petitioner shall be entitled to cost of these proceedings.

Made at Ile du Port on this ……………….. day of ………………. 2022.

R. J. Govinden

Chief Justice

R GOVINDEN, CJ

The Pleadings

The Petitioner avers in her Petition that she is an employee and a shareholder of Kim Koon & Co (Pty) Ltd a minority shareholder of the 3^rd Respondent in which she holds 10.22% of the shares. The remainder of the shares of the 3^rd Respondent are held by 1^st and 2^nd Respondent who are the registered Directors of the 3^rd Respondent. Other share are also held by the heirs Kamline Kim Koon, Shiokline Kim Koon, Towline Kim Koon, Miyive Kim Koon, Choung Yive Kim Koon, Semline KimKoon, Kamline, Sionline Kim Koon, Kamline Kim Koon and Shiokline Kim Koon.
The 3^rd Respondent carries on business as an importer and general merchant. The 1^st and 2^nd Respondent have for several years been deducting a sum of money from the dividends, payable to the Petitioner by the 3^rd Respondent, as school fees repayments for the education of her children in a manner which has never been formally approved or authorised by the Company at any general meeting or at all.
The late Mr J. R Kim Koon the founder of the 3^rd Respondent, herein after also referred to as” the founder” had always wanted his grandchildren to have a good education so he arranged payment for covering their school fees but he never associated such payments from the business of the 3^rd Respondent as being a loan to the recipients.
Mr Kameline Lee Kim Koon one of the former shareholders and directors of the 3^rd Respondent passed away in 2002. Following this death, the Company, under the stewardship of the 1^st Respondent, activated a loan repayment mechanism for the school fees and the Petitioner has with some shareholders been made the target of a repayment of school fees arrangement until this day.
The loan repayment arrangement above mentioned commenced on or about the year 2003 when the 1^st Respondent took charge as the Director of the Company. He started charging the Petitioner and two other siblings to pay back school fees despite not having a loan agreement to back up the unlawful retention and withdrawal of divided payments due to these members of the company. It only came about to the Petitioner’s attention on the 12^th October 2004 when she received a copy of the financial statement dated year end 31^ST December 2003.
The said 1^st Respondent has exempted one of the siblings from paying back the school fees.
Whenever a dividend is declared the Petitioner does not receive anything but instead the Company offsets it from the alleged school fees that it allegedly owed to the Company.
The Petitioner goes on to aver that this unlawful retention of funds due to her has now reached the sums set out in the attached breakdown in the schedule and that the said retention is fraudulent and without legal foundation or substance. The Schedule is as follows:

BREAKDOWN OF FUNDS RETAINED

The amounts owing to my client set out in the table below. These monies include but not limited to the following:

DATE	DETAILS	AMOUNTS OWED TO ME
18 December 2006	Compensation payment for retirement	Rs47,192.31
Year ended 31 December 2007	Dividends declared (Rs50,000)	Rs5,111
Year ended 31 December 2008	Dividends declared (Rs202,500)	Rs20,700
Year ended 31 December 2009	Dividends declared (Rs1,012,500)	Rs103,500
2012	Father’s bank account	Rs60,033.33
13 May 2016	Closure of Kiu On	Rs16,000
12 January 2017	Jersey Bank Account	USD10,950
21 February 2017	Jersey Bank Account	GBP2,770.42
3 August 2017	Jersey Bank Account	USD15,637.22
Year ended 31 December 2017	Amount credited to the alleged loan account	Rs411,763.00
12 December 2019	Marc Kim Koon Share distribution	Rs234,389.33

The Petitioner avers further that she has tried to resolve the matter without having to seek the legal route by amicable settlement and discussion. However, these attempts have yielded no results. She also avers that to date, she has not received any response from the Respondents regarding this matter despite having voiced her disagreement personally and through her proxies and finally by a letter of 9 October 2019. The Petitioner also avers that it was agreed, at the last AGM held on 22 December 2018, that there was no loan agreement in the first place.
She further avers that as a result of the unfair, oppressive and fraudulent nature of the actions of the 1^st and 2^nd Respondents jointly and severally in retaining dividends due to her and nor responding to her requests she is forced to proceed with taking legal action against the Respondents. As a result of this it is claimed that the 1^st and 2^nd Respondents have acted in breach of their duties as Directors of the 3^rd Respondent and as a result thereof she has suffered loss and damages as set out and tabulated in the attached Schedule which the Respondents are bound to make good jointly and severally.
Accordingly, with immediate effect she request that the alleged loan agreement for the school fees waived and nullified. Moreover, she asks that all the dividends and other funds used to set off against the school fees be refunded back to her with interest at commercial rates from the date of the first deduction from dividend payment until to date.
She finally request that this court orders the Respondents to jointly and severally:-

Regularise all the matters set out in the Petition at the expense of the Respondents and a refund of all the funds deducted from the dividends due;

Cancel all reference to any alleged loan agreement in the records and books of the 3^rd Respondent as a result of the regularisation above and to enter correct records of the dividends due to the Petitioner;

To pay damages to the Petitioner in the capital sum of Rs 200,000;

To pay the Petitioner all the above with interest at commercial rates continuing until full payment of all sums claimed with effect from the date of the first deductions made from the due dividends;

To pay the costs of this suit.

The Petition is supported by the affidavit of the Petitioner.
In their answer to the Petition, the Respondents do not dispute the different shareholdings of the parties in the Respondent Company.
The 3^rd Respondent goes on to admit that the 1^st and 2^nd Respondents have been, for several years, deducting a sum of money from dividends payable to the Petitioner as school fees repayments for the education of their children. However, they aver that it was approved to deduct a sum of money from the dividend payable to shareholders who were lent money to pay for the education of their children.
The Respondents refute the averments in the Petition regarding the altruistic intention of the late Mr J. R . Lee Kim Koon towards his grandchildren. They aver instead, that whether or not the late Mr. J. R. Lee Kim Koon wanted his grandchildren to have a good education, the use of company assets cannot be used for payment of private purposes.
Regarding the alleged change of circumstances following the death of Mr Kameline Lee Kim Koon, the activation of the loan repayment mechanism for the school fees and the targeting of the Petitioner and other shareholders, the Respondents aver that that the Petitioner and three other shareholders were not ‘made the target’ but they were asked to reimburse the money used to send their children overseas. They aver further that it was discussed at the Annual General Meeting on the 3^rd August 2022 that the auditors would revert on the authority given by the late J. R. Lee Kim Koon as to the charging of school fees to current accounts.
The Respondents deny the averments that the 1^st Respondent took charge of the affairs of the Company and started to charge the Petitioner and two other siblings to pay the school fees back despite having no loan agreements and the fact that she came to know his intention but on the 12^th October 2004. Moreover, and due to the close relationship of the parties, the agreements to be in writing are exempted. The 1^st Respondent was notified that school fees are not an allowable expense and he sought to rectify this. It is his contention that upon receiving such advice, he proceeded to act in the best interest of the company.
The Respondents aver that contrary to the Petitioner’s averments, all the siblings have paid back the 3^rd Respondent all the monies used to pay for the education of their children.
The Respondents agree that whenever a dividend is declared, the Petitioner does not receive anything. According to them, this because the Petitioner has refused to pay the money used to pay for the education of her children for the Company to offset the dividend to complete paying he school fees that she owes the 3^rd Respondent.
The Respondents dispute the content of the Petitioner’s attached breakdown. According to them the Jersey Bank Account on 12 January 2017 of US$10, 950, 21 February 2017 of £2,770.42 and 3 August 2017 of US$15,637.22 – the total amount when converted to Seychelles is equivalent to SCR 411,763. According to them the amount in the schedule in the table ‘year ended 31 December 2017’ is not a separate amount and is not any monies owed to the Petitioner. They aver that the 3^rd Respondent through its Directors are rectifying the situation where monies were illegally removed as the Petitioner refused to return the money.
The Respondents deny that the Petitioner has attempted to resolve the matter amicably and that no responses have been received in respect of her queries. In answer they aver that their legal counsel have sought to explain the matter to the Petitioner as to the reason why the amount was being deducted.
The Respondents deny any illegality, fraud and oppression on their part. They aver that the action of the 1^st and 2^nd Respondents do not constitute fraud as their action had no intention to deceive nor was there a material factor present consisting of contrivances, false allegations or the withholding of information.
The 1^st and 2^nd Respondents deny breaching their Director’s duties and aver that the 1^st Respondent as Managing Director was acting the best interest of the 3^rd Respondent and was abiding to the memorandum and articles of association.
The Respondents finally deny the prayers of the Petition. Instead, they aver that the Petitioner received funds from the 3^rd Respondent and that she should refund the amount owed.

The law

This Petition is filed under the provisions of Section 201 of the Companies Act 1972, Section 201 (1) and (2) are as follows;

Protection of minority shareholders

(2) If on the hearing of the application the court is satisfied either:

(3) Without prejudice to the generality of its powers under the last foregoing subsection, the court may order that:

(a) an action or other proceeding shall be brought in the company's name and conducted by any person (including the Registrar) appointed by the court;

(c) any person shall be appointed to be a director or managing director of the company or of its holding company or subsidiary on such terms and condition as the court thinks fit;

(d) a dividend shall be paid by the company to shareholders or any class of shareholders of the company or by a subsidiary of the company to the company;

(e) any person shall pay damages or compensation to the company or to the applicant for any loss suffered in consequence of that person's misconduct or breach of duty.

Admitted facts

I expressed my appreciation for the conduct of this civil case by way of admitted facts which had been worked out by the parties and presented to the court this has clearly narrowed down the issue for determination. The joint statement of admitted facts which were produced by the parties and have been admitted in evidence. It is as follows;

Agreed Facts

The Company (3rd Respondent) was incorporated in 1959, carries out the business as Importers and General Merchant.

The shareholders in the company are:

Heirs of Kamline Lee Kim Koon
Heirs of Shiookline Lee Kim Koon
Miyive Lee Kim Koon
Manyive Lee Kim Koon
Filine Lee Kim Koon
Niatline Lee Kim Koon
Sionline Lee Kim Koon
Semline Lee Kim Koon
Choung Yive Lee Kim Koon
Pit Kim Lee Kim Koon (Wife of Kamline)
Ah Yen Lee Kim Koon (Wife of Shiookline)

The Directors at that time were:

JR Lee Kim Koon
Kamline Lee Kim Koon
Shiookline Lee Kim Koon
Filine Lee Kim Koon
Niatline Lee Kim Koon

Directors who managed the company have changed over time, and it is significant that measures taken which are subject of this suit were executed after the passing of the principal founders JR Lee Kim Koon and Kamline Lee Kim Koon.

The main issues are whether the school fees money from JR Lee Kim Koon given to the Petitioner as a family support (gift) should be repaid and whether each and every dividend and payment unlawfully withheld from the Petitioner (totaling SCR 905,958.20) are owed by the Company to the Petitioner. This is disputed by the Respondents and allege that the school expenses were a loan. Petitioner also wants the court to look at all moneys coming from JR Lee Kim Koon to be put into the pot for consideration including all gifts, donations and financial assistance to all children and grandchildren without exception.

The Petitioner alleges that in 1981, JR Lee Kim Koon (the founder of the 3rd Respondent) wanted to support his grandchildren financially as he always wanted his grandchildren to have a good education. JR Lee Kim Koon financed many things for his family including the education abroad of various grandchildren. The school fees were paid to the respective families from around September 1981 to 1994.

The grandchildren who benefitted were:

Norbert, Jennifer and Doreen Chan Sing Chung, 3 children of Manyive Chan Sing Chung
Frankie and Cynthia Tsang Wing, 2 children of Miyive Tsang Wing
Shirley, John and Sandy Lee Kim Koon 3 children of Shiookline Lee Kim Koon
Allen and Vincent Lee Kim Koon, the 2 adopted children of Kamline Lee Kim Koon

JR Lee Kim Koon also assisted others in his family including his children as per the attached schedule over a period of over 30 years during approximately the late 1960s to 1994 using funds from various sources but mainly from the Company to finance several contributions he made for his children and others. None of these funds have been repaid or returned to JR Lee Kim Koon personally or to the company account.

JR Lee Kim Koon managed the company from its incorporation and was assisted by other directors and non-directors later on. It was JR Lee Kim Koon who had authority to manage and run the company and was the sole signatory for cheques.

At the time of the death of JR Lee Kim Koon, Kamline Lee Kim Koon took over to manage the company from 1995-2002. In 2002, Kamline Lee Kim Koon passed away and the 1st Respondent took over managing the company until present.

It was on the 8th August 2002, the 1st Respondent was made aware by the 3rd Respondent’s auditor, Mr Richardson through a letter, that “school fees have always been charged to the directors/family current accounts. It has been like that since 1981. The accounts were approved by Tai Tai (Kamline Lee Kim Koon), your father and yourself (1^st Respondent).”

Mr Richardson states in the letter: “school fees is not an allowable expense for tax purposes and is not in our view, an expense which should be borne by the company”.

Mr Richardson has made no statement about any other funds credited to the company account or of any loan agreements or who was liable to repay these sums allegedly taken from the company by JR Lee Kim Koon including funds used to pay for his own children’s purchase of property or education.

It is upon learning about this, that the 1st Respondent started regularizing this matter. This was discussed at the Annual General Meeting held on 12 July 2003 (Exhibit 7) where “the question of debt balances on current accounts arising though charges of school fees and other items were discussed. It was agreed to give some thought to regularizing the situation.”

The Petitioner enquires whether the regularization should have been applied to the directors accounts rather than to the shareholders?

The 1979 financial statements shows the various credit balances of the shareholders and directors.

Name

Amount/Balance at 31.12.1979

Shiookline Lee Kim Koon

SCR 277,769

Niatline Lee Kim Koon

SCR 267,734

Filine Lee Kim Koon

SCR 193,676

Kamline Lee Kim Koon

SCR 438,264

Chung Yive Kim Koon

SCR 153, 016

Manyive Kim Koon

SCR 265, 784

Miyive Kim Koon

SCR 282,563

Marc Kim Koon

SCR 244,240

Sionline Kim Koon

SCR 149,253

Semline Kim Koon

SCR 30,329

Page 9 of the 2001 Financial Statement shows those who had credit balance:

Name

Amount/Balance at 31.12.2001

Shiookline Kim Koon

SCR 137,287.00

Niatline Kim Koon

SCR 643, 871.00

Filine Kim Koon

SCR 593, 460.00

Debtors

Balance at 31.12.2001

The heirs of Kamline Lee Kim Koon: in the sum of SCR 229, 152

Miyive Lee Kim Koon- SCR 360, 126

Manyive Lee Kim Koon- SCR 758,204

The Credit balance for the other shareholders for 31.12.2001

Chung Yive Lee Kim Koon

SCR 360, 829

Marc Lee Kim Koon

SCR 533,662

Sionline Lee Kim Koon

SCR 141,848

Semline Lee Kim Koon

SCR 316,903

It was in 2006, four years after the 1st Respondent claims to have detected the issue of school payments which happened more than 12 years ago i.e. between 1981 to 1994, that he created the loan repayment mechanism despite the school fees money being a gift and the expiration of the option for a legal claim by the Respondents.

Petitioner objected to this loan repayment mechanism because JR Lee Kim Koon as promised, provided payment of school fees to her as a gift and therefore she should not refund any money. 1st Respondent responded that the money used was a loan as company funds should not be used for private purposes. 1st Respondent in unable to present a loan agreement. The 1st Respondent further responded that he was acting in the best interest of the company. Since then, Petitioner has constantly addressed this issue and has been continuously ignored to this day whilst 1st Respondent retained all payments whether associated with the finances of the company or not and dividends legally due to her in her capacity as a shareholder of the company/companies without her consent and against her objections.

Name of shareholder:	Manyive	Heirs of Kamline	Miyive	Heirs of Shiookline
2006	SCR 47,192 *payment withheld from Petitioner	-	-	-
Year: 2007	SCR 5,111 * payment/dividends withheld from Petitioner	SCR 5,111	SCR 5,111
Year: 2008	SCR 18,400 * payment/dividends withheld from Petitioner	SCR 18,400	SCR 18,400
2009	SCR 62,501 * payment/dividends withheld from Petitioner	SCR 103,500	SCR 103,500
2010	SCR 12,000 * added as a debt to the Petitioner
2011	SCR 12,000 * added as a debt to the Petitioner	-	SCR 233,115
2012	SCR 48,033 * payment/dividends withheld from Petitioner	SCR 16,726
2013
2014
2015
2016
2017
2018	SCR 411,763 *payment withheld from Petitioner
2019

Queries to the 1^st Respondent regarding the above table and respective financial statements:

Year 2008 where it is stated SCR18,400, dividends were declared (SCR 202,500). There are 225 shares in total and Manyive has 23 shares. Therefore, the correct amount owed to the Petitioner should be SCR 202,500/225 = SCR 900 per share x 23 = SCR 20,700.00

In year 2009 where it is stated Rs62,501, dividends were declared. The other two shareholders who has the same number of shares as the Petitioner received Rs103,500.00. Therefore, the correct amount owed to the Petitioner should be Rs103,500.00.

The Petitioner alleges that the FS shows that SCR12,000.00 was charged to the alleged school fees loan in 2010 and 2011, respectively. The Respondents have deducted this sum as contribution for meals. The Petitioner confirmed that she has already paid for meal contributions up till 2014 when the meals stopped. This should be rectified by the Respondents.

What was the SCR 48,033.00 that was deducted in 2012? The Petitioner requests that Respondents clarify this by providing further details and source of this amount.

Please note that the following amounts are missing from the above table and the respective financial statements:

2012 Father's (JR Lee Kim Koon) credit balance SCR 60,033.33 - (This was confirmed by Elizabeth Lee Kim Koon (1^st Respondent’s wife) and 1st Respondent);
13 May 2016 Closure of Kiu On SCR 16,000.00 - (This was confirmed by Chung Yive Lee Kim Koon (Jeanette), a shareholder of the 3^rd Respondent, Elizabeth Lee Kim Koon and 1st Respondent); and
12 December 2019 - Marc Lee Kim Koon Share Rs234,389.33

The Petitioner avers it is unlawful to withhold payments and dividends rightfully due to her; Respondents alleges these were Company funds and the other shareholders paid back their loans. Respondents cannot provide agreements, receipts or any other proof to support their claims. This is disputed by Petitioner who claims one of the siblings, Shiookline Lee Kim Koon has been exempted from paying. The Respondents state that no sibling has been exempted. Shiookline Lee Kim Koon had a credit balance which was used to offset the payment of the school fees. Disputed by Petitioner with proof emanating from 1st Respondent’s admission to Lisa Chan Sing Chung (daughter of the Petitioner) (exhibit 21) and Ah Yen aka Marie-Rose Lee Kim Koon (Shiookline’s widow) admitted to the Petitioner that they did not pay back the school fees.

FS 2017 and 2018, (see below table for a simplified summary) conclusion is Respondent stated Shiookline has repaid fully and has a credit balance of SCR 84,844. It is very hard to believe that SCR 52,443 was the amount that needed to be repaid for school fees? That is GBP 2550 (current exchange rate) for the school fees of 3 children from 1981 to 1994.

Shiookline KK and Heirs of Shiookline KK

Year	Amount in credit (SCR)
31 Dec 1979	277,769
31 Dec 2001	137,287
31 Dec 2002	137,287
31 Dec 2003	137,287
31 Dec 2004	137,287
31 Dec 2005	137,287
31 Dec 2006	0 (137,287 was deducted from Shiookline’s account and put in Heirs Shiookline KK)
31 Dec 2007	137,287 – 50,043
31 Dec 2008	87,244 – 2,400
31 Dec 2009	84,844
31 Dec 2010	84,844
31 Dec 2011	84,844
31 Dec 2012	84,844
31 Dec 2015	84,844
31 Dec 2016	84,844
31 Dec 2017	84,844
31 Dec 2018	84,844

After years of unsuccessful approaches by Petitioner, Respondents ignored her request and continue to retain payments and dividends rightfully due to her. They are applying a right of set-off to withhold the payments and dividends.

Petitioner alleges the school fees J R Lee Kim Koon paid for her children was an unconditional gift; she accepted in good faith with no obligation to repay. Accordingly, there is no agreement or debt between Petitioner and Respondents and so the right of setoff does not arise. The Respondents have stated that in such family matters, there will be no such loan agreement. Petitioner is very concerned about such a statement from the Respondents as directors of a company that “family matters” do not require a contract, since it highly represents their ongoing business practice and conduct and it may be a reason why the Respondents are unresponsive to repeated questions about observations made on the 2017 and 2018 financial statements (exhibit 41).

Petitioner brings this action on the basis the actions of Respondents or some of the Respondents are unfair oppressive and fraudulent in nature and amounts to a breach of directors’ duties against the shareholders of 3rd Respondent and requests for SCR 905,958.20 that the respondents have retained so far to be paid to her.

Petitioner also claims SCR 200,000 for damages and costs of this suit. In addition, Petitioner requests for interests at commercial rates for each withheld dividends and other amounts since their respective effective date stipulated in the table below until the full payment of the same have been paid to her.

*Effective Date*	*Details*	*Amounts owed (SCR)*
18 Dec 2006	Compensation payment for retirement	54,461.54
Year ended 31 Dec 2007	Dividends declared (SCR 50,000)	5,111.00
Year ended 31 Dec 2008	Dividends declared (SCR 202,500)	20,700.00
Year ended 31 Dec 2009	Dividends declared (SCR 1,012,500)	103,500.00
2012	Father’s credit balance	60,033.33
13 May 2016	Closure of KiuOn	16,000.00
12 Jan 2017	Amount credited to the alleged loan account (financial statement for year ended 31 December 2017)	411,763.00
12 Dec 2019	Marc Lee Kim Koon Share distribution	234,389.33
*Total :*		*905,958.20*

Respondents dispute they have breached their duties as directors and 1st Respondent says he has acted in the best interests of the Company as Managing director (a post that does not exist under the Companies Act 1972) and does not owe Petitioner any money since this claim relates to monies due to 3rd Respondent which was given by way of loan in the first place.

Analysis and determination

The court’s decision would be based on the facts as admitted by the parties before the court and nothing else. In a bid to assist the court to address the issues arising and in contention between the parties, the Petitioner and the Respondents have filed a list of issues left for determination by the court. I have scrutinised the said list and I find that indeed they properly and appropriately deal with the issues that is now left for the court determination and therefore they shall be the questions that I should seek to answer in resolving this case. The answer to these questions would ultimately answer the legal question paused by the Petition, namely whether the Petitioner being a shareholder of the 3^rd Respondent has established that the affairs of the 3^rd Respondent was conducted in a manner which is oppressive or unfairly prejudicial to some part of its shareholders. The factual issues are as follows:

Was JR Lee Kim Koon (grandfather), the founder of the 3^rd Respondent (Kim Koon Company) from 1959 to 1995, correct to use funds belonging to 3^rd Respondent for education for several of his children and grandchildren?

If the money expended in paragraph 1 was meant to be a gift for the beneficiaries of the above gift/donations, should this money or any part of it be repayable to the 3rd Respondent, if so by whom?

Should the money expended in paragraph 1 be reimbursed to 3rd Respondent, if so by whom?

If there was an obligation to repay the money expended in paragraph 1 by any of the beneficiaries, is the claim maintainable in favor of the 3^rd Respondent?

On which legal basis did the 1^st Respondent create a school fee loan repayment mechanism for the Petitioner setting them off from dividends and payments due to shareholders?

What part of the Companies Act or any Seychelles law entitled the 1^st Respondent to justify the above-mentioned measures in paragraph 5?

If the court decides that the withheld dividends and payments are to be reimbursed to the Petitioner, what remedy is the Petitioner entitled to?

The Respondents submitted that the 3rd Respondent was incorporated in 1959 and deemed incorporated under the Companies Act 1972. That it carries business as importers and General Merchants. The learned Counsel for the Petitioner submitted that the Respondent was incorporated without Articles of Association, the Company and that therefore it stands to be governed by the Articles of Association in Part ii of the First Schedule to the Act of the Act. These submission are not contested in this case. The court therefore finds that the scheduled Article of Association is the Constitution of the 3^rd Respondent in accordance with the provisions of Section 8 of the Companies Act which reads as follows;

8 Statutory regulations

In the Articles of Association of the 3^rd Respondent Clause 50 relating to powers and duties of Directors and clause 74 and 75 have special importance given the facts of this case. They read as follows;

It is not part of the case of either parties that the founder of the 3^rd Respondent abused his powers of Directorship of the Company. In fact both parties are in agreement that the founder acted benevolently, in good faith and at all material times in the best interest of the Company and in accordance with the Companies Memorandum of Association.

JR Lee Kim Koon was the founder of the 3^rd Respondent and Director who managed the day to day affairs of the 3^rd Respondent during his life time. The overall sense of control over the affairs of the Company before his death is an accepted fact in this case and both parties have admitted that JR Lee Kim Koon managed the company from its incorporation and was assisted by other directors and non-directors later on. It was JR Lee Kim Koon who had the full authority to manage and run the company and was the sole signatory for cheques.

As per the facts of this case the grandchildren who benefited from the financial assistance their grandfather benefitted included Norbert, Jennifer and Doreen Chan Sing Chung, three children of Manyive Chan Sing Chung, the Petitioner. The rest of the beneficiaries are the children of three siblings Miyive Tsang Wing, Shiookline Lee Kim Koon and Kamline Lee Kim Koon. It is also accepted that JR Lee Kim Koon also assisted others in his family including his children for over a period of over 30 years during approximately the late 1960s to 1994 using funds from various sources but mainly from the Company to finance several contributions he made for his children and others. None of these funds have been repaid or returned to JR Lee Kim Koon personally or to the company account.

Being such an altruistic grandfather, I find that there was nothing wrong for him to decide to fund his grandchildren’s education. Having taken that decision, he could have sourced the funds either from his personal account or from the account of the 3^rd Defendant provided that he did so in accordance with the Memorandum of Association and the provisions of the Companies Act aforementioned. There is no suggestion that the founder unlawfully exercised his powers as Director of the 3^rd Respondent or that there were challenges or contest by other Directors or shareholders of the 3^rd Respondent during the period that the funding took place by way of disbursement of funds belonging to the 3^rd Respondent.

In fact the facts shows that on the 8^th August 2002, the 1^st Respondent was made aware by the 3rd Respondent’s auditor, Mr Richardson through a letter that “school fees have always been charged to the directors/family current accounts. It has been like that since 1981. The accounts were approved by Tai Tai (Kamline Lee Kim Koon), your father and yourself (1^st Respondent).” In the view of this court this means that the 1^st Respondent, as Director, had actually given his approval in resolutions in accordance with the law the distribution of the funds in accordance with the will of the founder. There were no contest of the merits of the distributions.

The contest came much later and ex post facto the initial disbursement of the fees. Mr Richardson in his letter stated: “school fees is not an allowable expense for tax purposes and is not in our view, an expense which should be borne by the company”. It is upon learning about this, that the 1^st Respondent started “regularizing” this matter. This was then discussed at the Annual General Meeting held on 12 July 2003 (Exhibit 7) where “the question of debt balances on current accounts arising though charges of school fees” and other items were discussed. It was agreed to “give some thought to regularizing the situation.”

To this court, the view of auditor is but an opinion of an auditor, acting as such and it carries little legal significance. The fact that the school fees are not allowable expenses could not have prevented or prohibited the 3^rd Respondent from lawfully paying the school fees, if all the legal prerequisite for the decisions to be effected were present. Which was the case here. Business tax is calculated on the basis of the taxpayer’s taxable income. The taxable income is calculated by deducting allowable business expenses for the income year from the total assessable income for that year. It is in this context that the auditor’s advice arises and should be taken. He was performing what his professional duty called for and advising the 3^rd Respondent that they could lessen the tax burden by stopping the payment as it was not allowable business expense. In other words he was simply giving a tax avoidance advice rather than an advice on the lawfulness of past transactions.

The next and most decisive question in this case is in what form did the education funding took. The Petitioner says that they were by way of a gifts and the Respondents argue to the contrary, and state that they were by way of loans. The court therefore needs to make a finding of fact and categorise what kind of contract was formed between the Petitioner and the 3^Rd Respondent as a result of the actions of the founder. Needless to say, this categorisation would obviously carry huge significant on the outcome of this case, for if they were gifts there would be no obligation for repayment and setting off of the payments against payments of dividends. If they were loans, the obligation for repayments will arise and the setting offs will be justified.

The legal regimes of our law relating to gifts and loans are contained in both the previous and current Civil Code of Seychelles. The new civil code came into operation on the 1^st of July 2020. This case was registered in January 2020 and the facts arising in it arose before the enactment of the new Code accordingly by virtue of the provisions of Section 31 (1) (a) and (b) of the Interpretation and General Provisions Act 1976 the provisions of the previous Code will apply. Notwithstanding this, I also note that former provisions are not dissimilar from the current ones.

The following are Articles of the Civil Code that have their application in this case. First, it is the applicability of Article 894 which states that:

Article 894

A gift inter vivos is an act whereby the donor irrevocably divests himself of the ownership of the thing in favour of a donee who accepts it.

The preceding Article 893 is also pertinent to draw in on, and it states that:

Article 893

A person may not make a disposition of property gratuitously otherwise than by a gift inter vivos or by will, and in the forms hereinafter established.

There is also Article 931 (1) and Article 932, which provide that:

Article 931

Article 932

A gift inter vivos shall not be binding upon the donor and shall have no effect until accepted in express terms.

In addition to the above, I find it important to draw on the following articles from the Civil Code:

Article 938

A gift duly accepted shall be perfect by the mere consent of the parties; and the ownership of things given shall be transferred to the donee without any delivery being required.

Article 953

A gift inter vivos may only be revoked by reason of the failure to fulfil the conditions subject to which it was made, by reason of ingratitude, or by reason of the subsequent birth of children.

On the other hand the loan which is claimed to exist by the Respondents in this case is a simple loan falling under Article 1895 and subsequent Articles of the Code. Article 1895 provides that:

The obligation which arises from a loan of money shall always be of the numerical sum referred to in the contract.

This obligation shall not be construed as preventing the parties from agreeing to a readjustment of their monetary obligations by reference to some recognised index.

Similar to a gift inter vivos, there is no legal obligation as to the form of a loan agreement and the proof of both of those specific contracts would therefore be subject to the general law of evidence.

It is trite law that one who avers must prove his or her assertion. The court cannot conjure up figures from a few facts averred in a plaint and admitted by claimants and Respondents in court. The court relies on evidence and not averments to settle claims and in this case the evidence comes in the forms of the affidavits of the parties and the admitted facts which comes in the form of an aveu judiciare. The legal burden remains with the claimant throughout the trial to prove his case; on the party who affirms and not the party who denies it. However, this burden of proof may shift. The Roman maxim actor incumbit probatio or “he who avers must prove” applies. Similarly, article 1315 of the Seychelles Civil Code categorically states that “A person who demands the performance of an obligation shall be bound to prove it.” Accordingly, the Petitioner ought to prove the existence of a gift as she avers, and the Respondents to prove the existence of the loans as they aver.

A loan is when money is given to another party in exchange for repayment of the loan principal amount, plus interest. Hence, one main characteristic is the repayment of the loan amount. It was in 2006, four years after the 1st Respondent claims to have detected the issue of school payments which happened more than 12 years below, between 1981 to 1994, that he created the loan repayment mechanism despite the school fees money being a gift and the expiration of the option for a legal claim by the Respondents. The facts of this case shows that throughout the 12 years when the disbursement of the funds were made, there were no repayments of the funds either by the Petitioner or any of the siblings. From 1994 until the 1^st Respondent took the decision to effect the loan mechanism, not a single amount was repaid after he took over the management of the company. Mr Richardson the auditor could not show any repayment in his 2002 Report.

Another fact in this case is the lack of proof of any loan agreement or any other written documentation that would have at least amount to a beginning of proof in writing that the loan as it is being asserted existed .The loan appears to have been created ex post facto by the 1^st Respondent in a cost saving effort after the demised of the founder and upon being advised by the auditor. He may have done this in good faith and in the best interest of the 3^rd Respondent. However the facts remain that his decision cannot have retrospective effect on the decision of the founder and the 3^rd Respondent.

The Respondents argues that the lack of documentation regarding the loan agreement is due to the moral impossibility as a result of the close family ties, which creates a legal exception to the necessity for proof of the agreements or written proof of the agreement. Having gone over the facts of this case the court will not agree to this submission as I find that the lack of proof of the existence of the loan document in this case is not caused by the familiarity of the individuals concern but arises as a result of the total inexistence of such agreement whether in written or oral forms. There were no meetings of mind in that regard.

On the other hand, all indications is that what took place here is a gift inter vivos. The court finds that the facts of the case clearly revealed that there was an act whereby the donor, being the 3^rd Respondent, irrevocably divests itself of the ownership of the funds consisting of monies in favour of the donees, which included the Petitioner, who accepted it. This took place as a result of the benevolent nature and intent of the founder. This amounts to unconditional gifts for which there arose no obligation to repay and for which the right to set off does not arise as claimed and carried out by the 1^st and 2^nd Respondents.

This finding effectively determines all the list of issues left for the determination of this court.

As a result, this court finds that that 1^st and 2^nd Respondent have acted in a manner which is oppressive and unfairly prejudicial to some shareholders including the Petitioner. Indeed, the Petitioner has been treated oppressively since 2004 by being made to pay off a loan which never existed. I am further satisfied that the 1^st and 2^nd Respondents were aware that this seriously prejudiced the interests of the Petitioner and other shareholders. To this end, damage has been caused to the Petitioner, and the 1^st and 2^nd Respondent are personally liable.
Accordingly the court makes the following orders;
1. 1. 1. The 3^rd Respondent shall cancel all reference to any alleged loan agreements in the records and books of the 3^rd Respondent in regards to school fees paid to the Petitioner and that of other shareholders in the period of September 1981 to 1994 by the 3^rd Respondent;
    2. The 3^rd Respondent shall refund to the Petitioner the total sum of dividends that has been withheld and set off against the school fees gift of the Petitioner and that of any other shareholders. The sum withheld for the Petitioner amounts to SCR 905,958.20;
    3. The 1^stand 2^nd Respondent shall jointly and severally pay to the Petitioner the sum of SCR 200,000.
    4. The above refunds of the dividend shall be effected with interest at commercial rates continuing until full payment of all sums claimed with effect from the date of the first deductions made from the due dividends.
    5. The Petitioner shall be entitled to cost of these proceedings.

Made at Ile du Port on this ……………….. day of ………………. 2022.

R. J. Govinden

Chief Justice

Auguste v Singh Construction (SCA 71 of 2022) [2022] SCCA 74 (16 December 2022);

Mithila Mudalige — Thu, 05 Jan 2023 05:13:47 +0000

Auguste v Singh Construction (SCA 71 of 2022) [2022] SCCA 74 (16 December 2022);

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Company Law

Mithila Mudalige Thu, 01/05/2023 - 05:13

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2022-scca-74.docx

IN THE COURT OF APPEAL OF SEYCHELLES

Reportable

[2022] SCCA 71

(16 December 2022)

SCA 52/2020

(Arising in CS 53/2019)

THEOLENE AUGUSTE Appellant

(rep. by Guy Ferley)

and

SINGH CONSTRUCTION Respondent

(rep. Karen Domingue)

Neutral Citation: Auguste v Singh Construction (SCA 52/2020) [2022] SCCA 71

(16 December 2022)

(Arising in CS 53/2019) [2020] SCSC 788

Before: Twomey-Woods, Robinson, Tibatemwa-Ekirikunbinza, JJA

Summary:

Heard: 7 December 2022

Delivered: 16 December 2022

______________________________________________________________________________

JUDGMENT

______________________________________________________________________________

Robinson JA (DISSENTING JUDGMENT)

The case before the Supreme Court concerned whether or not the Respondent, the then first defendant, ″[6] […] has a legal status as a partnership with capacity to be sued in that manner″.
The learned trial Judge ruled on the defence in limine litis that ―

″[15] [she] find[s] no reason to depart from the finding in Ernestine & Ors above. If anything the two persons registered a business name under which they traded. The Plaintiff has to show that in fact there was a partnership between the two persons and the manner in which that has to be shown in line with Article 1834 is to provide proof by way of an agreement in writing which the registration of a business name is not.

[16] In the circumstances, the plea in limine litis succeeds and the Plaint is struck out against the first Defendant.″

The Appellant, the then first defendant, appealed the judgment. On the 7 December 2022, at the hearing of the appeal, the majority judgment dismissed the appeal for reasons contained in it. The dismissal of the appeal by the majority judgment was premised on the late filing of written submissions by the Appellant by Counsel of record. I am not here concerned with the reasoning and conclusion of the majority judgment.

At the appeal, I concluded that tche appeal should not be dismissed. I informed the parties that my reasons would follow. I now give reasons.

I have considered the Seychelles Court of Appeal Rules, 2005, as amended, hereinafter referred to as the ″Rules″, relevant to what is being discussed. The President of the Seychelles Court of Appeal makes the Rules in the exercise of the powers conferred under Article 136 (1) of the Constitution of the Republic of Seychelles [CAP 42]. I bear in mind that we, the People of Seychelles, adopt and confer on ourselves the Constitution as the fundamental and Supreme law of our sovereign and democratic Republic. Having considered the provisions of the Rules applicable to this judgment, I decided not to discuss those applicable provisions without the aid of the parties' submissions. I also decided not to embark on such a discussion as I believed it was unnecessary.

For this judgment, I have considered the proceedings at the Roll Call of 1 December 2022 and the appeal hearing of 7 December 2022.

At the Roll Call on the 1 December 2022, the Court of Appeal comprised the President of the Court of Appeal and the four Justices of the Court of Appeal. I have reproduced in part the proceedings at the Roll Call of 1 December 2022 concerning this case ―

″IN THE SEYCHELLES COURT OF APPEAL

SITTING OF THURSDAY 1 DECEMBER 2022 AT 9.00 AM BEFORE THEIR LORDSHIPS A. FERNANDO, PRESIDENT, M. TWOMEY-WOODS, F. ROBINSON, L. TIBATEMWA AND S. ANDRE, JUSTICES OF APPEAL – ASSISTED BY MS. STEPHANIE JOUBERT, COURT ORDERLY - TRANSCRIBED BY THE UNDERSIGNED COURT REPORTER MARIE-CLAIRE JULIE

Theolene Auguste Appellant

V/S

Singh Construction Respondent

Civil Appeal No: SCA 52 of 2020

Mr. Guy Ferley, Counsel for the Appellant

Mr. Basil Hoareau, standing in for Ms. Karen Domingue, as

Counsel for the Respondent

Mr. Hoareau: Ms. Domigue is unavailable today. I believe there has been a death in the family.

Court (Twomey-Woods JA): Yes.

Court (President): What about the written submissions?

Mr. Hoareau: I believe it has not been filed yet. May she be granted until Monday to file her Skeleton Heads?

Court (Andre JA): Sorry?

Mr. Hoareau: Until Monday, this coming Monday.

Court (Andre JA): For?

Mr. Hoareau: For her to file her Skeleton Heads of Argument.

Court (President): This case is coming up on Wednesday, next.

Mr. Hoareau: Yes.

Court (President): You will inform her that?

Mr. Hoareau: I will do so, I will advise her.

Court (President): Yes, we will give time till Monday. Please inform her, because otherwise we will have to proceed with the case, or, I mean, as per the Rules, we will have to go on the basis that she will not be able to argue the matter and we will proceed on the basis of his arguments.

Mr. Hoareau: I will inform her accordingly.

Court (President): Please, do inform her.

Mr. Hoareau: Yes.

Court (President): That is what the Rules provide for.

So, this case would be taken up for hearing on the 7^th of December 2022 in the morning (at 9.00 am.). Right?

Mr. Hoareau: Much obliged.″ Emphasis supplied

I mentioned that Mrs Karen Domingue did not file written submissions by the 5 December 2022. Mrs Domingue caused to be sent, by an e-mail to the Registry of the Court of Appeal, a medical certificate in which it was stated that she was ill. She neither attended the appeal nor filed any written submissions. I state no more about the conduct of Counsel for the Respondent at the appeal since the whole Court did not probe.
I consider the proceedings at the Roll Call ― The President of the Court of Appeal, mindful of the Rules, ordered that the case should proceed based on the arguments of the Appellant by Counsel if Counsel for the Respondent were not to file her written submissions by the 5 December 2022. Having made the aforesaid order, the President of the Court of Appeal went on to order that the case ″would be taken up for hearing on the 7^th of December 2022″. I mentioned that the Court of Appeal was correctly constituted under the Rules when the President of the Court of Appeal made these orders. The Court of Appeal did not raise the late filing of written submissions at the Roll Call when these orders were made. Also, I mention out of interest that the Court selected by the President of the Court of Appeal to sit to hear the appeal did not comment on the orders made by the President of the Court of Appeal at the Roll Call.
In the light of the above, I find that the Court of Appeal, at the Roll Call, had ordered that the appeal hearing should proceed on the 7 December 2022 based on the written submissions of Counsel for the Appellant. I am not here concerned with the course the appeal should have taken, given that Mrs Domingue had sent a medical certificate stating that she was ill. With all due respect to the two Justices of Appeal, it suffices to state that it is unclear why they decided to dismiss the appeal on the 7 December 2022, when it came up for hearing. No question of late filing of written submissions arose for consideration by the Court of Appeal, at the appeal.
I am mindful that rules of court are made to be complied with by parties. In the case of Chetty v Esther (SCCA 44 of 2020)[2021] SCCA 12 (13 May 2021) concerning the Rules, this Court, stated ―

″[i]t is important to note that Rules of Court are made in order to be complied with. Without complying with and should the Court allow that to happen, then it is both sending wrong signals and establishing precedent, which may eventually lead to flouting and abuse of the whole court process. That should not be allowed to happen. This Court had an opportunity, recently, to re-emphasise this point (see Central Stores vs Minister William Herminie and Another, judgment dated 25 February 2005; Harry Berlouis and Francis Gill, SCA No. 13 of 2003)″.

As mentioned above, no question of late filing of written submissions arose for consideration by the Court of Appeal, at the appeal.
Hence, I make an order that this Court should hear this appeal.
I make no order as to costs.

_____________________________

F. Robinson JA.

Signed, dated and delivered at Ile du Port on 16 December 2022.

Law report citations

Auguste v Singh Construction (SCA 52/2020) [2022] SCCA 71 (16 December 2022) (Arising in CS 53/2019) [2020] SCSC 788

IN THE COURT OF APPEAL OF SEYCHELLES

Reportable

[2022] SCCA 71

(16 December 2022)

SCA 52/2020

(Arising in CS 53/2019)

THEOLENE AUGUSTE Appellant

(rep. by Guy Ferley)

and

SINGH CONSTRUCTION Respondent

(rep. Karen Domingue)

Neutral Citation: Auguste v Singh Construction (SCA 52/2020) [2022] SCCA 71

(16 December 2022)

(Arising in CS 53/2019) [2020] SCSC 788

Before: Twomey-Woods, Robinson, Tibatemwa-Ekirikunbinza, JJA

Summary:

Heard: 7 December 2022

Delivered: 16 December 2022

______________________________________________________________________________

JUDGMENT

______________________________________________________________________________

Robinson JA (DISSENTING JUDGMENT)

The case before the Supreme Court concerned whether or not the Respondent, the then first defendant, ″[6] […] has a legal status as a partnership with capacity to be sued in that manner″.
The learned trial Judge ruled on the defence in limine litis that ―

[16] In the circumstances, the plea in limine litis succeeds and the Plaint is struck out against the first Defendant.″

The Appellant, the then first defendant, appealed the judgment. On the 7 December 2022, at the hearing of the appeal, the majority judgment dismissed the appeal for reasons contained in it. The dismissal of the appeal by the majority judgment was premised on the late filing of written submissions by the Appellant by Counsel of record. I am not here concerned with the reasoning and conclusion of the majority judgment.

At the appeal, I concluded that tche appeal should not be dismissed. I informed the parties that my reasons would follow. I now give reasons.

I have considered the Seychelles Court of Appeal Rules, 2005, as amended, hereinafter referred to as the ″Rules″, relevant to what is being discussed. The President of the Seychelles Court of Appeal makes the Rules in the exercise of the powers conferred under Article 136 (1) of the Constitution of the Republic of Seychelles [CAP 42]. I bear in mind that we, the People of Seychelles, adopt and confer on ourselves the Constitution as the fundamental and Supreme law of our sovereign and democratic Republic. Having considered the provisions of the Rules applicable to this judgment, I decided not to discuss those applicable provisions without the aid of the parties' submissions. I also decided not to embark on such a discussion as I believed it was unnecessary.

For this judgment, I have considered the proceedings at the Roll Call of 1 December 2022 and the appeal hearing of 7 December 2022.

At the Roll Call on the 1 December 2022, the Court of Appeal comprised the President of the Court of Appeal and the four Justices of the Court of Appeal. I have reproduced in part the proceedings at the Roll Call of 1 December 2022 concerning this case ―

″IN THE SEYCHELLES COURT OF APPEAL

Theolene Auguste Appellant

V/S

Singh Construction Respondent

Civil Appeal No: SCA 52 of 2020

Mr. Guy Ferley, Counsel for the Appellant

Mr. Basil Hoareau, standing in for Ms. Karen Domingue, as

Counsel for the Respondent

Mr. Hoareau: Ms. Domigue is unavailable today. I believe there has been a death in the family.

Court (Twomey-Woods JA): Yes.

Court (President): What about the written submissions?

Mr. Hoareau: I believe it has not been filed yet. May she be granted until Monday to file her Skeleton Heads?

Court (Andre JA): Sorry?

Mr. Hoareau: Until Monday, this coming Monday.

Court (Andre JA): For?

Mr. Hoareau: For her to file her Skeleton Heads of Argument.

Court (President): This case is coming up on Wednesday, next.

Mr. Hoareau: Yes.

Court (President): You will inform her that?

Mr. Hoareau: I will do so, I will advise her.

Mr. Hoareau: I will inform her accordingly.

Court (President): Please, do inform her.

Mr. Hoareau: Yes.

Court (President): That is what the Rules provide for.

So, this case would be taken up for hearing on the 7^th of December 2022 in the morning (at 9.00 am.). Right?

Mr. Hoareau: Much obliged.″ Emphasis supplied

I mentioned that Mrs Karen Domingue did not file written submissions by the 5 December 2022. Mrs Domingue caused to be sent, by an e-mail to the Registry of the Court of Appeal, a medical certificate in which it was stated that she was ill. She neither attended the appeal nor filed any written submissions. I state no more about the conduct of Counsel for the Respondent at the appeal since the whole Court did not probe.
I consider the proceedings at the Roll Call ― The President of the Court of Appeal, mindful of the Rules, ordered that the case should proceed based on the arguments of the Appellant by Counsel if Counsel for the Respondent were not to file her written submissions by the 5 December 2022. Having made the aforesaid order, the President of the Court of Appeal went on to order that the case ″would be taken up for hearing on the 7^th of December 2022″. I mentioned that the Court of Appeal was correctly constituted under the Rules when the President of the Court of Appeal made these orders. The Court of Appeal did not raise the late filing of written submissions at the Roll Call when these orders were made. Also, I mention out of interest that the Court selected by the President of the Court of Appeal to sit to hear the appeal did not comment on the orders made by the President of the Court of Appeal at the Roll Call.
In the light of the above, I find that the Court of Appeal, at the Roll Call, had ordered that the appeal hearing should proceed on the 7 December 2022 based on the written submissions of Counsel for the Appellant. I am not here concerned with the course the appeal should have taken, given that Mrs Domingue had sent a medical certificate stating that she was ill. With all due respect to the two Justices of Appeal, it suffices to state that it is unclear why they decided to dismiss the appeal on the 7 December 2022, when it came up for hearing. No question of late filing of written submissions arose for consideration by the Court of Appeal, at the appeal.
I am mindful that rules of court are made to be complied with by parties. In the case of Chetty v Esther (SCCA 44 of 2020)[2021] SCCA 12 (13 May 2021) concerning the Rules, this Court, stated ―

As mentioned above, no question of late filing of written submissions arose for consideration by the Court of Appeal, at the appeal.
Hence, I make an order that this Court should hear this appeal.
I make no order as to costs.

_____________________________

F. Robinson JA.

Signed, dated and delivered at Ile du Port on 16 December 2022.

Ex Parte Vijay Construction Pty Ltd (MA 191 of 2020) [2020] SCSC 774 (19 October 2020);

Anonymous — Fri, 01 Jul 2022 09:52:01 +0000

Ex Parte Vijay Construction Pty Ltd (MA 191 of 2020) [2020] SCSC 774 (19 October 2020);

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Anonymous (not verified) Fri, 07/01/2022 - 09:52

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2020-scsc-774.pdf

SUPREME COURT OF SEYCHELLES

Reportable
[2020] SCSC 774
MA 191/2020
(Arising XP 130/20)

In the ex parte matter of:
VIJAY CONSTRUCTION (PROPRIETARY) LIMITED Applicant
(rep. by S Rajasundaram)

And

IN THE MATTER OF THE COMPANIES ACT 1972 AND THE INSOLVENCY ACT 2013

Neutral Citation:   Ex Parte Vijay Construction Pty Ltd MA 191/2020 (Arising in XP 130/20) [2020] SCSC 774 (19 October 2020).
Before:                   Govinden J
Summary:              Application under Section 112 of the Insolvency Act for the appointment of a provisional liquidator is dismissed.
Heard:                    15 October 2020

Delivered: 19 October 2020

ORDER
The ground for the main winding up petition and that of this application is one and the same, namely the inability of the company to pay its debt .However, that in this application I have to decide whether there are reasonable ground to believe that this is so, whilst in the main case, I would have to do so on a balance of probabilities. I find that to make this crucial finding of fact at this stage of the proceedings would be too premature. Any determination in that regards would result in prejudging this issue. The prejudicial nature would be exacerbated by the fact that the court is invited to make this determination here on an affidavit that contains no averments as to the applicant’s inability to pay its debts.

RULING

This is an application filed under the provisions of Section 112 of the Insolvency Act, herein after also referred to as “the Act” and Regulation 27 of the Companies (Winding up) Regulations 1975. It prays that the Official Receiver and if the Official Receiver is unable to accept the appointment, for Mr Duraikannu Karunakaran be appointed as a suitable provisional liquidator. The application is made following the filing by the Applicant company of a winding up petition in case EXP 130/20 seeking an order that it be wound up for the reasons that it is unable to pay its debt.

The application is supported by the affidavit of Mr V. J. Patel, a director of the company. According to this deponent the appointment of a liquidator is imperative in this matter as the applicant is engaged in a number of construction contracts. The two main contracts are for the construction of the Club Med Resort of Ste Anne Island and ongoing construction work on Eden Island and the Eden View at Roche Caiman. Both contracts being time sensitive and that work has had to stop on both as a result of the filing of the winding up petition. He further avers that its clients are eager to press on with the work and are threatening to terminate the contracts with the applicant and that notice of termination has already been received in respect of the Ste Anne Resort contract.

The court has thoroughly considered the averments found in the application and its supporting affidavit and the submissions of the Learned counsel of the applicant. It has also in the process scrutinized the legal provisions dealing with such kinds of applications.

It appears that the application seeks the appointment of a provisional liquidator. This is evident on the face of the Motion. However, at paragraph 5 of the affidavit the deponent prays for “a liquidator” to be appointed in order to manage the affair of the company. Whether this is deliberate or not, this inconsistency needs to be reconcile as there is a difference between those the two, these relates to both the functions and the conditions of appointment of a liquidator and a provisional liquidator. Having considered the submission of counsel on this issue, who clarified that paragraph 5 is a mistake and should have been read as provisional liquidator, I will read the application as one calling for the appointment of a provisional liquidator instead of a liquidator. This is more so given that this court has not made a winding up order following the presentation of the winding up Petition.

The provisions of the Act governing appointment of a provisional liquidator are found in Section 112 (1) of the Act, which reads as follows;

“112.(1) The Court may appoint the Official Receiver or any other qualified person as provisional liquidator at any time after the presentation of a winding up petition, if
(a) there are reasonable grounds to believe that the company is unable to pay its debts; or
(b) any of the property of the company available to meet its debts is at risk of being removed from Seychelles.
(2) Where a provisional liquidator is appointed by the Court under subsection (1), the Court may restrict his or her powers in such manner as it thinks fit by the order appointing him or her or by a subsequent order, subject to any restriction so imposed, the provisional liquidator shall have the same powers and be subject to the same liabilities as a liquidator appointed after the making of a winding up order”.

In its supporting affidavit the representative of the company has not grounded his prayers in any of the two sub limbs of Section 112 (1) of the Act. He only refers a number of contractual difficulties that the company is facing as a result of the presentation of the winding up petition. The same applies to the Motion, which only makes reference to Section 112 (1). The court had to refer to the content of the winding up petition to find out under what limbs that this application is founded. Having done so, it has revealed that the applicant is seeking the order on the ground that the company has no ability to pay a judgment debt awarded by the court.
Accordingly, it is clear that this application is being made on the first limb of the provision, namely that there are reasonable ground to believe that the company is unable to pay its debt.
It is therefore patently clear that the ground for the main winding up petition and that of this application is one and the same, namely the inability of the company to pay its debt, albeit that in this application I have to decide whether there are reasonable ground to believe that this is so, whilst in the main case I would have to do so on a balance of probabilities. This as it may, I find that to make this crucial finding of fact at this stage of the proceedings would be premature. Any determination in that regards would lead me to prejudge the core issue of fact found in the petition. This prejudicial nature is exacerbated by the fact that the court is here invited to make this determination based on an affidavit that contains no averments as to the applicant’s inability to pay its debts.

This application is accordingly dismissed.

Signed, dated and delivered at Ile du Port on 19th October 2020

_________
R Govinden J
Judge of the Supreme Court

SUPREME COURT OF SEYCHELLES

Delivered: 19 October 2020

RULING

The provisions of the Act governing appointment of a provisional liquidator are found in Section 112 (1) of the Act, which reads as follows;

This application is accordingly dismissed.

Signed, dated and delivered at Ile du Port on 19th October 2020

_________
R Govinden J
Judge of the Supreme Court

Payet v Gregeoire's (Pty) Ltd (MC 87 of 2020) [2021] SCSC 356 (23 June 2021);

Anonymous — Fri, 01 Jul 2022 09:39:29 +0000

Payet v Gregeoire's (Pty) Ltd (MC 87 of 2020) [2021] SCSC 356 (23 June 2021);

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Abramova and Ors v ACT Offshore Ltd (MC 91 of 2020) [2021] SCSC 395 (05 July 2021);

Anonymous — Fri, 01 Jul 2022 09:37:49 +0000

Abramova and Ors v ACT Offshore Ltd (MC 91 of 2020) [2021] SCSC 395 (05 July 2021);

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SUPREME COURT OF SEYCHELLES

Reportable
[2021] SCSC 395
MC91/2020
In the Ex Parte matter:

GALINA ABRAMOVA                                                                   1st Petitioner

SVETLANA ABRAMOVA
(on her own behalf and as legal representative
of Maria Abramova)                                                                           2nd Petitioner

VOLKOVA NATALIA
(as legal representative of Volkova Michel
and Volkov Alexander)                                                                      3rd Petitioner
(Represented by Frank Elizabeth)

VS

ACT OFFSHORE LIMITED                                                          Respondent
(Represented by Mr. Georges)

Neutral Citation: Abramova & Ors vs ACT Offshore Ltd (MC91/2020) [2021] SCSC 395 (5 July 2021)
Before: E. Carolus, Judge
Summary: Conflict of laws - Applicable law for determination of validity of foreign Will and dispositions made thereunder - Law applicable to transfer of shares in IBC incorporated in Seychelles under IBC Act.

Delivered: 5 July 2021

ORDER
The Petition is Dismissed.

ORDER

_____________________________________________________________________________E. Carolus, Judge
Background

This petition concerns the inheritance of shares in two International Business Companies namely Omni Commerce Ltd and Intelligence Development Ltd (“the IBCs”) which are averred to be owned by the late Mr. Mikhail Yuriyevich Abramov (the “deceased”). The petitioners seek the transfer of the shares to the legal heirs of the deceased (his minor children and surviving spouse) and his mother who is allegedly a legatee under his Will. It is not clear whether the children are also legatees under the will.
The petition is brought by Galina Abramova (1st petitioner) who is averred to be the mother of the deceased; Svetlana Abramova (2nd petitioner) in her own capacity as the surviving spouse of the deceased, and as mother and guardian of Maria Abramova the minor daughter of the deceased; and Natalia Volkova (3rd petitioner) in her capacity as mother and guardian of Michel Volkova and Alexander Volkov the minor children of the deceased. The Respondent is ACT Offshore Limited, averred to be the registered agent of the two Companies.
The petition was filed on 29th October 2020. An affidavit in support thereof in the English language, dated 29th January 2021 and sworn by 3rd petitioner Natalia Volkova in Zurich (duly apostilled) was filed on 17th February 2021. A document was filed on 10th March 2021 in the Russian language, duly apostilled, to which was attached an affidavit in the English language stated therein to be made by 2nd petitioner Svetlana Abramova on 22nd January 2021, and which appears to be a translation of the aforementioned document and apostille in Russian, although there is nothing to confirm that this is the case. The translation appears to have been made in Russia from the statement in the Russian language at the end of the document and the stamp thereon, but is not apostilled. It is also not possible to ascertain whether the translation was made by a certified interpreter. Also filed on 10th March 2021 is a bundle of two documents, duly apostilled: the first is in the Russian language and the second is an affidavit in the English language which is stated therein to be made by a Russian lawyer Odyagaylo Vladimir Fedorovich on 23rd October 2020. Again the affidavit appears to be a translation of the first document although there is nothing to confirm the same and it is also not possible to know whether the translation was made by a certified interpreter. Yet another document in the Russian language was filed on 10th March 2021, again duly apostilled, and accompanied by an affidavit in the English language which is stated therein to be made by the 1st petitioner Galina Abramova on 21st January 2021. Again the affidavit appears to be a translation of the first document in Russian but it is not possible to ascertain whether the translation was made by a certified interpreter or not and it is not apostilled. With the exception of the affidavit of the 3rd petitioner, the aforementioned defects affect the admissibility of these documents and the extent to which they may be relied upon by the Court.
Also of note is that although the petition lists 12 documents which the petitioners rely on in support of the petition, only one of those namely “[t]he Affidavit of advocate of Moscow City Bar Odyagaylo Vladimir Fedorovich N.108 dated 27.08.2020” has been filed in these proceedings. As stated at paragraph [4] above the original affidavit in Russian is accompanied by what appears to be an English translation of it but which the court is unsure was made by a certified interpreter. At this stage I also find it appropriate to mention that it is trite that any document to be relied upon in an application/petition and to be used in conjunction with an affidavit in support of such application/petition must be exhibited to such affidavit. Vide Lablache de Charmoy v Lablache de Charmoy SCA MA08/2019 [17 September 2019]; Laurette & Ors v Savy & Ors SCA MA13/2019 [22 October 2019]; Trevor Zialor v R SCA MA16/2017 [17 October 2017]. As Robinson JA stated in Lablache de Charmoy v Lablache de Charmoy (supra) at paragraph 11 of her Order, “Counsel for the applicant should be mindful that the affidavit stands in lieu of the testimony of the applicant”. Just as a person giving oral testimony before a Court would tender documentary evidence as exhibit to the Court, so must these supporting documents which are documentary evidence be exhibited to the affidavit. At the very least these documents should have been attached to the petition.
The respondent having been served with the petition failed to put in an appearance whereupon the court ruled that the matter be decided ex-parte on written submissions of counsel for the applicants, which were duly filed. Ms Aliyah appearing on behalf of Mr. Georges later appeared in court on behalf of the respondent and stated that she was instructed that according to their records the two companies in question do not exist, that the respondent neither represents nor acts for these companies and that the respondent would abide to whatever decision the Court makes.

The Petition

It is averred in the petition that the late Mikhail Yuriyevich Abramov a Russian National who was ordinarily resident of Moscow passed away testate on the 20th August 2019 and that at the time of his death he was sole owner of two companies registered as International Business Companies in Seychelles under the International Business Companies Act 2016 as amended, namely Omni Commerce Ltd and Intelligence Development Ltd. Neither his Birth Certificate or his Death Certificate nor his Will has been exhibited. There are also no documents to show that he owned the two IBCs or even the existence of the IBCs.
It is averred that he left the following “four successors and one surviving spouse entitled to inherit from [his] estate as per his last Will and Testament in Law”, in the follow shares:

Mrs Galina Abramova (1st petitioner), the mother of the deceased – entitled to inherit 11/14 (eleven fourteenth) of 1/2 (one half) share of the deceased’s estate under his Will;
Svetlana Abramova (2nd petitioner) – entitled to 1/2 share of the deceased’s estate as the surviving spouse of the deceased;
Maria Abramova (represented by the 3rd petitioner her mother Svetlana Abramova), the minor daughter of the deceased – entitled to 1/14 share of the deceased’s estate as his successor under the law;
Alexander Volkov (represented by the 3rd petitioner his mother Natalia Volkova), the minor son of the deceased – entitled to 1/14 share of the deceased’s estate as his successor under the law; and
Michel Volkova (represented by the 3rd petitioner his mother Natalia Volkova), the minor daughter of the deceased – entitled to 1/14 share of the deceased’s estate as his successor under the law.

There is no documentary evidence establishing the relationship of the petitioners and their children to the deceased. Further, as stated above, no copy of the Will has been exhibited. This puts in question not only the status of the petitioners to make the present petition as heirs and/or legatees of the deceased, but also the entitlement of such heirs and/or legatees to the succession of the deceased.
It is averred that a Notarial Certificate from Russia has provided for the shares in the two Seychelles registered companies under Russian Law in the proportions mentioned above which certificate has been attached to the petition. No such certificate is attached to the petition. Mention is also made of a Certificate of Title, issued by Russian Federation Notary in the right of spouses to share in common joint property, but again this is not attached to the petition.
It is further averred that the petitioners have been legally advised that the testator’s other heir under the law, his father Mr. Abromov Yury Ivanovich is not entitled to inherit from the deceased’s estate in accordance with Article 1157 of the Russian Civil Code. According to the supporting affidavits this is because he has refused his inheritance. No document attesting to the same is attached. It is also averred that the petitioners have been legally advised that the testator’s son Georgiy Michailovich Abramov has attained the age of majority and in accordance with Article 1149 of the Russian Civil Code does not have the right to an obligatory share of the deceased’s succession because of the existence of the Will.
The petitioners aver that in light of the above, it is just and necessary for the Court to firstly interpret sections 6(3) and 115 of the IBC Act; secondly to pronounce itself on (1) the validity of the Will and (2) the applicable law that should govern the dispositions made under the Will (in regards to the shares in the IBCs) in Seychelles i.e. whether the applicable law is Seychellois or Russian law. If the Will is valid and can be recognised and executed under the laws of Seychelles, the Court should direct whether Russian law or the Laws of Seychelles are applicable, under which legal regime the property should be distributed, and how the shares in the two companies should be distributed among the heirs of the deceased.
In terms of the petition, the petitioners pray this court to:

Declare whether or not the Will authorised and executed by the Russian Notary in accordance with Russian Law can be recognized and executed in in the territory of Seychelles and/or is it possible to enforce it in Seychelles under Russian law or under Seychelles law;
Declare whether Seychelles or Russian law should be the applicable law to determine the validity of the Will and the dispositions made thereunder;
Declare the respective shares of the heirs and the surviving spouse in the two Seychelles registered companies;
Direct the Registered Agent of the two companies, namely ACT Offshore Limited to amend their register of shareholders and register the shares in the two companies in the names of the petitioners in accordance with their respective shares in accordance with the law.

Analysis

In its analysis, the Court will seek to determine the applicable law with regards to the validity of the will and the dispositions made thereunder, as well as address the law applicable to the transfer of shares in the two IBCs to the deceased’s heirs and the actual transfer of such shares to them. These issues will be discussed below in that order, in light of the submissions of counsel for the petitioner, relevant case law and the evidence before the Court.

Applicable law in regards to validity of the Will and the Dispositions made thereunder

It is to be noted that although counsel for the applicants submits at page 4 of his submissions that the applicable law is Russian law, it is not clear whether this is with respect to the validity of the will and the dispositions thereunder or the transfer of shares, or both. He submits that Russian law is the applicable law by reason of the deceased’s domicile, nationality and sufficiency of connection test. With regards to sufficiency of connection he cites several cases which however mostly relate to recognition of Receivership Orders and bear no relevance to inheritance issues in terms of private international law which arise in this case.
It was established in Rose v Mondon (1964) SLR 134 that the formal validity of a will is determined by the place of execution of the will; that the validity of a will as to movable property is determined by the testator's domicile and is to be tested against the requirements of the law of the testator’s domicile (obiter); and that validity of a will in respect of immovable property is determined by the law of the place where the property is situated.
With regards to applicable succession laws, Rose v Mondon (supra) applied the principle from Austin v Bailey (1962) M.R. 115 citing the following passage at page 117 of the report:

The validity of the will of the testatrix regarding the disposal of her estate is governed, in the case of the movable property as well as in the case of immovable property bequeathed by her, by the applicable successoral law. There is no specific text in the Civil Code which lays down what is the applicable law regarding movable property, but it is settled case law that the maxim ‘mobilia sequuntur personam’ applies and that the law applicable is the law of the “lieu d’ouverture” of the succession and consequently the law of the domicile of the testatrix (See Battifol, Traite Elementaire de Droit International Prive, 3rd edn,, para. 651; Niboyet Traite de Droit International Prive Francais 2e. Edn., vol. 4, pages 413, 764; Clunet, Journal du Droit International Prive, 1940-1945, pages 112, 805). The successoral law regarding immovable property is the law of the place where it is situated. This rule derives from the second paragraph of art. 3 of the Civil Code which provides that “les immeubles, meme ceux possedes par des etrangers, sont regis par la loi francaise” (see Battifol, op. cit., para. 652; Niboyet op. cit. pages 198, 758; Clunet, op. cit., 1955, p. 408)”
Emphasis added.

The general rule that testamentary succession of movables is governed by the law of domicile of the deceased at the time of his death is also established under UK and French law. The position in the UK is clearly set out set out at page 560 Cheshire, G. C. 1961, Private International Law, Sixth edn., Oxford University Press, as follows:

“(ii)Testamentary succession
The general rule established in this country and in the U.S.A. is that testamentary succession to movables is governed exclusively by the law of the domicil of the deceased as it existed at the time of his death. When a testator dies domiciled abroad leaving assets in England, it is true that probate must be taken out in England, and it is also true that the assets must be administered in this country according to English law, but nevertheless all questions concerning the beneficial succession must be decided in accordance with the law of the domicil. The duty of the executor is to ascertain who, by the law of the domicil, are entitled under the will, and that being ascertained to distribute the property accordingly”

Emphasis added

In France, it is stated at page 8, Guide de droit international privé des successions that -

“l’art. 3 du Code Napoléon; dans le droit français la succession mobilière est soumise à la loi du dernier domicile du défunt et la dévolution et la transmission de biens immobiles à la loi de chacun des États où ceux-ci se trouvent. Dans cette catégorie des systèmes scissionnistes s’intègrent aussi les pays qui appartiennent à la common law (lex domicilii pour la masse mobilière, lex rei sitae pour les immobiliers). L’art. 78 du Code belge de droit international privé, adopté par la Loi du 16 juillet 2004, prévoit: „§1er. La succession est régie par le droit de l'Etat sur le territoire duquel le défunt avait sa résidence habituelle au moment de son décès. § 2. La succession immobilière est régie par le droit de l'Etat sur le territoire duquel l'immeuble est situé. Toutefois, si le droit étranger conduit à l'application du droit de l'Etat sur le territoire duquel le défunt avait sa résidence habituelle au moment de son décès, le droit de cet Etat est applicable.”

Emphasis added

It is averred in the petition that the deceased was ordinarily resident in Russia and his Will was executed at his place of his residence. If the Will was executed in Russia as averred, in line with the principle established in Rose v Mondon (supra) it should be Russian law that determines the Will’s formal validity. However as previously pointed out, the Will of the deceased is neither attached to the petition nor exhibited in any of the affidavits in support thereof. Consequently this Court is unable to ascertain whether the Will was indeed executed in Russia and consequently to make any finding as to the same.
In regards to the validity of the Will as far as it concerns the shares in the two IBCs, according to the principle in Rose v Mondon (supra) the applicable law is determined by the testator's domicile, as shares are considered to be movable property. In that respect section 42 of the International Business Companies Act, 2016 (the “IBC Act”), provides that, “[a] share in a company is movable property”. It is clear therefore that to determine the applicable successoral law and the validity of the dispositions, both the deceased’s domicile and the ownership of the shares are material.
With regards to his domicile it is averred in the petition that the deceased was ordinarily resident in Russia and that he was a Russian national. If these averments are true and unless further issues arise in relation to his residence and citizenship (e.g. in the event that he is not actually resident in Russia or if there is a change of his domicile Vide Sullivan v Sullivan (1975) SLR 104 on domicile of choice versus domicile of origin; and Rose v Mondon (supra) where a Seychellois citizen who had passed away in Kenya was held not to lose his domicile of origin in Seychelles) his domicile can be considered to be Russia and the applicable law Russian law. However neither official documents in support of such averments nor the Birth and Death certificates of the deceased were attached to the petition. In the circumstances the Court cannot make a finding as to either the domicile of the deceased or consequently the applicable law.
As to ownership of the shares, it is further averred in the petition that at the time of his death the deceased was 100% owner of the two IBCs by the deceased. However no ownership documents (or other documents providing information regarding the shareholder(s) and/or unlimited beneficial owner of the company and the nature of their ownership (direct shareholder or beneficial owner through trust declaration or other instrument)) were attached to the petition or exhibited to any of the supporting affidavits.
The petitioners have also prayed this Court to declare whether or not the Will authorised and executed in accordance with the Russian law can be recognized and executed in in the territory of Seychelles. Their counsel has not expressly addressed this point in his submissions. According to Rose v Mondon (supra) and Article 999 of the Civil Code a foreign Will can be recognised in Seychelles. Article 999 provides that, “[a] person whose domicile is in Seychelles and who finds himself in a foreign country may make his will by a document under private signature as provided by article 970 of this Code, or in accordance with the law of that country”. However both Rose v Mondon (supra) and Article 999 concern a Will made by a person domiciled in Seychelles whereas in the present case, the testator is alleged to be domiciled in Russia. Furthermore as stated at paragraph 18 above, since the Will has not been produced before this Court it is not possible to ascertain whether it was indeed executed in Russia. Consequently this Court considers it futile to address the issue of whether a Will authorised and executed in accordance with foreign law can be recognized and executed in Seychelles.

Applicable law to Transfer of Shares and Direction to Registered Agent to transfer the shares

The Petitioners pray this Court to declare the respective shares of the heirs and the surviving spouse in the two IBCs and direct the registered agent to register the shares in their names. Neither these issues nor the legal provisions relating thereto were addressed in counsel’s written submissions.
The petitioners aver in paragraph 8 of the petition that “. . . it is just and necessary for the Court to interpret Section 6(3) and 115 of the IBC Act”. However there is no subsection (3) in section 6 of the IBC Act, 2016. Section 6 relates to ‘Companies which may be incorporated or continued’ and section 115 relates to ‘Notice of meetings of members’. These provisions clearly do not relate to transfer of shares of a deceased person to his heirs/ legatees.
With regards to the law of movables in private international law, Cheshire, G. C. 1961, Private International Law, Sixth edn., Oxford University Press points out that shares of stock of a company are connected to the place where the issuing company has its residence and states at page 508:

“The rule of private international law is that shares are deemed to be situated in the country where they can be effectively dealt with as between the shareholder and the company. In other words, shares which are transferable only by an entry in the register are deemed to be situated in the country where the register of branch registrar is kept.”

Section 104 of the IBC Act provides that an up-to-date register of members shall be kept at a company’s registered office unless the company is a listed company (section 106). It provides:

(1) Subject to section 106, every company shall keep at its registered office in Seychelles a register to be known as a register of members, and enter in it the following information as appropriate for the company –

the name and address of each person who holds any shares in the company;
the number of each class and series of shares held by each shareholder;
the name and address of each person who is a guarantee member of the company;
the date on which the name of each member was entered in the register of members; and
the date on which any person ceased to be a member.

Section 161 further provides that an IBC shall at all times have a registered office in Seychelles, which is the principal place of business of its registered agent. In view of these provisions, the shares of the two IBCs in question can therefore be deemed to be situated in Seychelles and consequently the transfer of such shares should be done in accordance with the IBC Act.
Transfer of a deceased member's shares are dealt with under section 60 of the IBC Act:

A transfer of the share of a deceased member of a company made by the deceased member’s personal representative, although the personal representative is not a member of the company, is as valid as if the personal representative had been a member at the time of the execution of the instrument of transfer.

Section 2 of the IBC Act defines “personal representative” as “the executor or administrator for the time being of a deceased”.
Under section 61 of the IBC Act shares can also be transferred by operation of law:

Shares in a company may pass by operation of law, notwithstanding anything to the contrary in the memorandum or articles of the company.

The register of members can also be rectified upon application to Court where information that is required to be entered in the register is omitted under section 108:

(1) If –

information that is required to be entered in the register of members under section 104 is omitted from the register or inaccurately entered in the register; or
there is unreasonable delay in entering the information in the register,

a member of the company, or any person who is aggrieved by the omission, inaccuracy or delay, may apply to the Court for an order that the register be rectified.
(2) On an application under subsection (1), the Court may –

either refuse the application, with or without costs to be paid by the applicant, or order the rectification of the register, and may direct the company to pay all costs of the application and any damages the applicant may have sustained;
determine any question relating to the right of a person who is a party to the proceedings to have his name entered in or omitted from the register of members, whether the question arises between –

two or more members or alleged members; or
between one or more members or alleged members and the company; and

otherwise determine any question that may be necessary or expedient to be determined for the rectification of the register of members.

However in the absence of any documentary evidence that the deceased was indeed the owner of shares in the two IBCs the Court cannot order the registered agent to transfer such shares.
Related to the issue of the transfer of the shares are the share of the deceased’s succession to which the heirs are entitled. Before concluding, I find it necessary to say a few words on the subject. It is established by Seychelles courts that foreign law must be pleaded and proved as fact and if that is not done, foreign law is presumed to be the same as Seychelles law. Vide (Dauban v de Failly (1943) SLR 93; Beitsma v Dingjan (No 1) (1974) SLR 292; Teemooljee v Pardiwalla (1975) SLR 39; Biancardi v Tabberer Travel (1975) SLR 91; Sounardin v D’Offay (1976) SLR 236; Privatbanken Aktieselskab v Bantele (1978) SLR 226; Intour v Emerald Cove (2000) SLR 21; La Serenissima v Boldrini (2000-2001) SCAR 225).
The Petitioner submits that Russian law should apply to the dispositions under the Will and the affidavit of Russian lawyer Odyagaylo Vladimir Fedorovich outlines the position of Russian succession laws relevant to the present case. As per the affidavit, under Russian law, the surviving spouse is entitled to 1/2 of the estate of the deceased, unless there is a marriage contract. However the reasons for the share attributed to the mother of the deceased (11/14 of the one half remaining estate) and the deceased’s minor children (1/14) is not entirely clear. Furthermore, the full value of the estate is unknown and the Court does not know the proportion of the deceased’s estate that the shares in the two IBCs make up: it is not known whether the shares in the two IBCs comprise the deceased’s entire estate or constitutes only a portion of it. This could have been clarified by the Certificates of Title listed as documents to be relied upon and the Will if they had been produced.

Decision

In conclusion, relying on the decision in Rose v Mondon (supra) I find that the formal validity of the Will is determined by the place of its execution; the validity of a Will as to movable property is determined by the testator's domicile and is to be tested against the requirements of the law of the testator’s domicile; and where it concerns movable property the applicable successoral law is also the law of the domicile of the deceased. Shares in the IBCs being movable property according to the IBC Act, the validity of the disposition of the Seychelles IBC shares forming part of the deceased’s estate, should be determined in accordance with the successoral law of the deceased’s domicile.
As stated above, the Court is not in a position to make any finding as to the formal validity of the Will and the validity of the dispositions thereunder in the absence of the Will itself and other supporting documents proving the domicile of the deceased. Further, no proof of the ownership of the shares in the two IBCs having been brought by the petitioners, the Court cannot order the transfer of such shares to the heirs and/or legatees. In addition, the value of the whole of the deceased’s estate is unknown and the share of the succession of the deceased to which the heirs and/or legatees are entitled as stated in the petition and affidavits cannot be verified as the Will has not been produced, rendering it difficult to make a determination as to the proportion of the shares to which the heirs and/or legatees are entitled. Also worth noting as stated at paragraph 3 hereof are the defects in the affidavits in support of the petition and their effect on the extent to which reliance may be placed on them by the Court.
In the circumstances, I have no option but to dismiss the petition.

Signed, dated and delivered at Ile du Port on 5 July 2021.

____________
E. Carolus
Judge

SUPREME COURT OF SEYCHELLES

Reportable
[2021] SCSC 395
MC91/2020
In the Ex Parte matter:

Delivered: 5 July 2021

ORDER
The Petition is Dismissed.

ORDER

_____________________________________________________________________________E. Carolus, Judge
Background

The Petition

Analysis

Applicable law in regards to validity of the Will and the Dispositions made thereunder

In France, it is stated at page 8, Guide de droit international privé des successions that -

Applicable law to Transfer of Shares and Direction to Registered Agent to transfer the shares

Section 104 of the IBC Act provides that an up-to-date register of members shall be kept at a company’s registered office unless the company is a listed company (section 106). It provides:

Shares in a company may pass by operation of law, notwithstanding anything to the contrary in the memorandum or articles of the company.

The register of members can also be rectified upon application to Court where information that is required to be entered in the register is omitted under section 108:

(1) If –

two or more members or alleged members; or
between one or more members or alleged members and the company; and

otherwise determine any question that may be necessary or expedient to be determined for the rectification of the register of members.

Decision

Signed, dated and delivered at Ile du Port on 5 July 2021.

____________
E. Carolus
Judge

In the matter of Companies Act 1972 v Sword Investment (MC 24 of 2021) [2021] SCSC 851 (09 December 2021);

Anonymous — Fri, 01 Jul 2022 09:37:43 +0000

In the matter of Companies Act 1972 v Sword Investment (MC 24 of 2021) [2021] SCSC 851 (09 December 2021);

Flynote

Company Law

Anonymous (not verified) Fri, 07/01/2022 - 09:37

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2021-scsc-851.pdf

BURHAN J

This is an application made under section 63 of the Companies Act for confirmation by the Court of a resolution to reduce the share capital of the Company, Sword Investment Capital Ltd. In support of its application, the Applicant has submitted the Special Shareholders’ Resolution where it was resolved that the share capital would be reduced, memorandum and articles of association, and affidavits in support by Nourijan Mahammadi CHAMPIRI and Manavta KISTO, Directors of Sword Investment Capital Ltd.

Section 64 of the Companies Act provides that where the proposed reduction of share capital involves either a diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, creditors get a say. In this case, it is averred at paragraph 14 of the affidavits in support sworn by Nourijan Mahammadi CHAMPIRI and Manavta KISTO, both being Directors of Sword Investment Capital Ltd, that the proposed reduction does not in any manner whatsoever prejudice or affect the rights of the creditors or any stakeholders.

The Registrar of Companies intervened in this matter, represented by the Attorney General and raised no objections to this application.

I do note, however, some discrepancies in the documents in support of this application. The application refers to a resolution passed at an Extraordinary Meeting held on 16th August 2020 where it was resolved, inter alia, that the Share Capital of the Company be reduced to USD200,000 consisting of 200,000 ordinary shares at par value USD1 each. However, the resolution attached to the application reflecting this decision was not dated. The affidavits in support of the application are both dated 15th March 2020. However, the Commissioner of Oaths or Notary Public having attested both affidavits has dated it 15th March 2021. This date appears both next to their signature as well as on the stamp affixed to the affidavits. While this discrepancy in dates could be attributable to a typing error or oversight, given that the directors could not possibly have attested in March 2020 to something that would occur months later in August 2020, there are other discrepancies in dates throughout this application. The Memorandum and Articles of Association of Sword Investment Capital Ltd initially attached to the application appear to be drafts of amended documents reflecting the reduction, as they are dated 12th August 2020. These documents reflect the proposed reduced share capital which was allegedly resolved on 16th August 2020, and yet they are dated prior to that date.

The Court, having made note of some of these discrepancies, gave the applicant an opportunity to submit further documents in support. The applicant proceeded to file a Special Shareholders Resolution that was dated, as well as the original memorandum and articles of association. The new Special Shareholders Resolution approving the reduction in share capital is dated 1st June 2020. The application and affidavits in support all allege that the special resolution to reduce the share capital took place on 16th August 2020 (paragraph 10 of Application dated 15th March 2021 and paragraph 12 of affidavit of Mohammadi Champiri and Manavta Kisto dated 15th March 2020 correct date 15th March 2021 as per date appearing with signature ). Therefore, the resolution before this Court does not support the averments made in either the application itself or the affidavits in support.

In light of the fact that the applicant in this matter was afforded an opportunity to file further documents in support after certain discrepancies were pointed out, one cannot overlook these persisting inconsistencies. Whether it be due to an oversight on the part of the applicant or that the Company’s records are not in order, the Court cannot overlook this lack of diligence on behalf of the applicant.

For the above reasons, I cannot confirm the reduction of share capital and I hereby dismiss the application.

Signed, dated and delivered at Ile du Port on 09th December 2021. ____________M Burhan J

BURHAN J

The Registrar of Companies intervened in this matter, represented by the Attorney General and raised no objections to this application.

For the above reasons, I cannot confirm the reduction of share capital and I hereby dismiss the application.

Signed, dated and delivered at Ile du Port on 09th December 2021. ____________M Burhan J

B.V Capital Invest Nur and Sarsenova Gulnara and Ltd II Investments Seed Hightech (CS 25 of 2021) [2021] SCSC 700 (28 October 2021);

Anonymous — Fri, 01 Jul 2022 09:20:16 +0000

B.V Capital Invest Nur and Sarsenova Gulnara and Ltd II Investments Seed Hightech (CS 25 of 2021) [2021] SCSC 700 (28 October 2021);

Flynote

Company Law

Anonymous (not verified) Fri, 07/01/2022 - 09:20

Headnote and holding

The following Orders are made:[1] The defendant company Hightech Seed Investments II Ltd is hereby directed to rectify its records and register the registered transfer of shares pursuant to the instrument of transfer between the 1st and 2nd plaintiffs and from the register of members of the defendant company to remove the name of the 1st plaintiff and enter the name of the 2nd plaintiff instead.[2] Cost is granted as prayed in favour of the 1st and 2nd plaintiffs as against the defendant.[3] The Registrar is hereby directed to serve a copy of the judgment of the defendant company with immediate effect.

Download

2021-scsc-700.pdf

2021-scsc-700.docx

ANDRE J
Introduction

This Judgement arises out of plaint of the 23 March 2021 for directing the rectification of the records of the defendant company; register the transfer of registered shares pursuant to the ‘instrument of transfer’, and from the register of members of the defendant company to remove the name of the transferor/1st plaintiff and enter the name of the transferee/2nd plaintiff instead and an Order as to costs against the defendant.
The matter proceeded ex-parte as against the defendant company following their non-appearance albeit being duly served.

General background

The defendant company is an international business company (company number 099632) incorporated in Seychelles.
The 1st plaintiff owns 595 ordinary shares in the defendant company and has sold 595 ordinary shares to the 2nd plaintiff.
The instrument of transfer dated the 27 October 2020, signed by the transferor (ie: the 1st plaintiff transfers all of its registered 595 ordinary shares in the defendant company to the 2nd plaintiff.
The said instrument of transfer of the registered shares was sent to the defendant company for registration through a letter dated 30 November 2020.
There is a statutory duty that a company shall, on receipt of an instrument of transfer, enter the name of the transferee of the hare in the register of members.
The defendant company has no reason to refuse the transfer of the registered share as per the instrument of transfer afore-said.
In breach of that statutory duty, the defendant has failed to enter the name of the transferee of the share, (ie: the name of the 2nd plaintiff, in the register of members thereby causing prejudice against the plaintiffs.
The prayers sought by the plaintiffs are as at paragraph [1] above.

Evidence

Two witnesses testified in support of the plaint, namely, the 1st and the 2nd plaintiffs.

The 1st plaintiff represented by Mr. Marat Rzagaziev testified in a gist, that he could represent the 1st plaintiff’s company by virtue of power of attorney (Exhibit P1 and P2). That the 2nd plaintiff is an incorporated company in Seychelles with registration number 099632 (Exhibit P3). That the 1st plaintiff owes 595 ordinary shares in the defendant company (Exhibit P4) and that the 1st plaintiff sold his said shares to the 2nd plaintiff (Exhibit P5). That Exhibit P5, was subsequently sent to the defendant company for registration letter for registration (Exhibit P6) and Exhibit P6 also referred to a previous share transfer made (Exhibit P7) and which Exhibit P7 was replaced by Exhibit P5. That there is a statutory duty on the defendant company to register the same transfer as per Exhibit P5 and the 2nd plaintiff to be registered as member shareholder. That to his knowledge, there is no excuse for the defendant company not to register the transfer as per Exhibit P5 and also to register the 2nd plaintiff as the shareholder and hence moving as per prayers above for breach of such duties.
[12] The 2nd plaintiff was repented by one Azhigariyeva as per power of attorney (Exhibit P8). She testified in a gist as follows:
That the 2nd plaintiff purchased the shares of the 1st plaintiff in the defendant company (Exhibit P5) and the 2nd plaintiff signed the document of transfer and she identified the signature of the 2nd plaintiff on the said instrument whose signature she testified she knew. That the said transfer was not registered by the defendant company for no reason whatsoever and that by omitting to do so, the defendant company breached its statutory duty to register the said transfer and caused prejudice to the 2nd plaintiff. Thus, she moved as per prayers at paragraph [1] (supra). She also moved for costs.
Discussion on the law and Findings

Section 62 (1) of the International Business Companies Act provides that:

‘Subject to subsections (2) and (3) and section 66, registered shares in a company shall be transferred by a written instrument of transfer- (a) signed by the transferor; (b) signed by the transferee; (c) containing the name and address of the transferee.

The evidence of the 1st and 2nd plaintiffs indicate the scenario of events between the transferor and transferee Exhibit P5 substituting Exhibit P7.
In the absence of any evidence the contrary from the defendant company to show otherwise, Exhibit P5 constitutes a written instrument of transfer under the said section 62 (1) and the registered shares must be transferred.
Section 62 (5) of the International Business Companies Act further provides that:

‘Subject to its memorandum or articles and section 63, the company shall, on receipt of an instrument of transfer, enter the name of the transferee of the share in the register of members unless the directors resolve to refuse or delay the registration of the transfer for reasons that shall be specified in the resolution.’
[16] It is evident in the absence of evidence to the contrary from the defendant company, that the defendant company had to upon receipt of the instrument of transfer, enter the name of the transferee namely, the 2nd plaintiff in the register of members of the defendant company.
Conclusion

Following the above discussions and findings, the plaint is upheld that the Court hereby orders as follows:

[1] that the defendant company Hightech Seed Investments II Ltd is hereby directed to rectify its records and register the registered transfer of shares pursuant to the instrument of transfer between the 1st and 2nd plaintiffs (Exhibit P5) and from the register of members of the defendant company to remove the name of the 1st plaintiff and enter the name of the 2nd plaintiff instead.
[2] Cost is granted as prayed in favour of the 1st and 2nd plaintiffs as against the defendant company.
[3] The Registrar is hereby directed to serve a copy of the judgment on the defendant company with immediate effect.

Signed, dated, and delivered at Ile du Port on 28 October 2021.

…………………………….
ANDRE J

ANDRE J
Introduction

General background

Evidence

Two witnesses testified in support of the plaint, namely, the 1st and the 2nd plaintiffs.

Section 62 (1) of the International Business Companies Act provides that:

Following the above discussions and findings, the plaint is upheld that the Court hereby orders as follows:

In Re: The Companies Ordinance 1972 and in the matter of Natalie Lefevre v Beau Vallon Properties and Ors (CC 8 of 2017) [2019] SCSC 899 (15 October 2019);

admin — Sat, 22 May 2021 10:44:29 +0000

In Re: The Companies Ordinance 1972 and in the matter of Natalie Lefevre v Beau Vallon Properties and Ors (CC 8 of 2017) [2019] SCSC 899 (15 October 2019);

Flynote

Company Law

Shareholders

admin Sat, 05/22/2021 - 10:44

Headnote and holding

Takeover bid - directors’ conduct - breach of fiduciary duties - oppressive conduct against minority shareholder

TWOMEY CJ

Introduction

[1] In brief, this case concerns a takeover bid, the alleged breach of fiduciary duties by the directors of a company and the alleged oppressive conduct by a majority shareholder and directors against a minority shareholder.

[2] By way of background, the parties to this case are as follows: The Petitioner, Natalie Lefevre (hereinafter Ms. Lefevre), is a minority shareholder in the First Respondent, Beau Vallon Properties (hereinafter BVP). Ms. Lefevre acquired 213,280 shares for SCR 1,000,000 in BVP by a blank share transfer form signed on 13 September 2005 and registered with the company registry on 21 May 2007 (exhibit R1-12). The validity of this share transfer was subject to legal proceedings. Pursuant to a Court of Appeal judgment in

Lefevre vs Chung Faye and others (SCA 36 of 2011, SCA 33 of 2011) [2014] SCCA 14 (11 April 2014), Ms. Lefevre’s shares were registered in the member’s registry on 11 April 2014.

[3] The First Respondent is BVP, a Seychellois limited company registered on 10 July 1972. It has the following company number: 840565-1.

[4] The Second Respondent is Drambois Investments Ltd (hereinafter Drambois), a Seychellois limited company incorporated on 5 May 2016 (exhibit R2-1). Drambois and the Third Respondent, Concordia Investments Ltd (hereinafter Concordia) entered into an agreement in October 2016 for the transfer of Concordia’s shares in BVP to Drambois. This transfer has not to date taken effect.

[5] Concordia is another Seychellois limited company and has been the majority shareholder in BVP since 2007.

[6] The Fourth Respondent is Vadim Zaslonov (hereinafter Mr. Zaslonov). He is the secretary and a director of BVP since 6 September 2007.

[7] The Fifth Respondent is Yuri Khlebnikov (hereinafter Mr. Khlebnikov), a director of BVP since 15 August 2013.

[8] The Sixth Respondent is the Registrar of Companies (hereinafter the Registrar).

Pleadings

[9] On 24 April 2017, Ms. Lefevre filed a petition against the Respondents under the Companies Ordinance 1972 (hereinafter the Ordinance) seeking orders from the Court in respect of shares owned by her in BVP and other matters concerning inter alia, her rights as a shareholder. The petition was supported by an affidavit sworn on the same day.

[10] On 21 November 2017, she filed an amended petition. She sought relief for rectification of the Share Register and the Companies Register generally to reflect that she was the rightful and legal owner of 35% of the authorized and issued shares in BVP pursuant to section 107 of the Ordinance in respect of the purchase of BVP shares in 2005 and 2007; in respect of the agreement made between Drambois and Concordia to sell the shares in BVP and the subsequent attempt by Drambois to trigger the provisions of section 200 of the Ordinance to buy her shares; and orders pursuant to section 201 of the Ordinance to protect her minority shareholding.

[11] She sought judgment in her favour and prayed that the Court make the following orders:

(1) An order appointing Halpern and Woolf as inspectors to investigate the affairs of BVP and the conduct of the directors of BVP and to report to the Court;

(2) An order requiring the Respondents and any other person having in his or her possession or control any record, information or document belonging to or relating to the affairs of BVP to disclose the same to the above inspectors and to allow the inspectors to make copies;

(3) An order preventing the disposal of or dealing with any assets including but not limited to any bank accounts or rights in land belonging to BVP until after the investigation;

(4) An order preventing the 1st, 2nd, 3rd, 4th, and 5th Respondents from undertaking further dealings with BVP, more particularly, the shares and assets of BVP and not to incur any new liability on behalf of BVP by taking or giving loans from the capital of BVP until further orders from the Court;

(5) An order declaring any transfer of assets of BVP made without proper authority of the company void and that the assets be returned to the company forthwith; namely the purported shares allegedly sold by Concordia to Drambois;

(6) An order that all persons holding any assets of BVP shall forthwith return the same to the Company;

(7) An order that any person found to have acted contrary to law with regard to the conduct of the affairs of BVP be dealt with as the law prescribes;

(8) An order that Halpern and Woolf value the shares of BVP and that of Ms. Lefevre;

(9) An order for damages jointly and severally against the 2nd, 3rd, 4th and 5th Respondents in the sum of SCR 1,000,000 for inconvenience, distress, anxiety, mental anguish and trauma;

(10) An order that the Respondents are jointly and severally be liable for costs of this petition; and

(11) Any other order as the Court may deem fit in the circumstances of the case.

[12] In the course of the proceedings, the relief sought by Ms. Lefevre evolved. The Court therefore refers to Ms. Lefevre’s final written submissions, received on 11 October 2018, in which Ms. Lefevre sets out the relief sought in preferential order. These are as follows:

(1) That the agreement and purported transaction between Drambois and Concordia be declared unlawful and void and any steps taken to conclude that agreement be declared null and void and set aside;

(2) That Concordia be ordered to sell its shares to Ms. Lefevre on the same terms and conditions as it has stated it was to sell to Drambois;

(3) Alternatively, that the Court declare that Field Nominees Ltd did not have sanction to purchase the additional 5,390,000 shares in BVP, and that these shares are therefore unallocated. Further, that Ms. Lefevre and Concordia are entitled to purchase the unallocated BVP shares in 35% / 65% pro-rata proportions, at the original nominal value of those shares in November 2005.

(4) Alternatively, that the Court order Concordia to purchase Ms. Ms. Lefevre’s shares on the basis of its original agreement with Accredo/Langer in 2007; that is that it pays the equivalent of 18.5% of the total value of the company for Ms. Ms. Lefevre’s shares, such value to be determined by an independent valuation and subject to any provisos, conditions, qualifications or other issues highlighted by the independence auditors;

(5) That BVP and its directors be investigated by the Inspector for Taxes, the Company Registrar [and the relevant Financial Reporting Authority] in relation to its dealings and liabilities incurred towards the various IBC’s and other entities and the source of such loans and destination of such repayments.

(6) Costs.

[13] Following the filing of the petition, the Respondents sought various further and better particulars, the first dated 20 June 2017. On 25 July 2017, Ms. Lefevre filed answers to the request for further and better particulars. An additional request for further and better particulars dated 5 December 2017 was made by the Respondents. Ms. Lefevre provided an initial response to these requests in two separate replies dated 16 January 2018, and in two further replies dated 30 April 2018.

[14] Drambois filed an answer dated 11 May 2018 to the amended petition of Ms. Lefevre. The answer sets out pleas in limini litis. An amended version of this plea was later filed with the Court and is reproduced below. On the merits, the reply responds to the statements in the amended petition and accordingly seeks that the Court dismiss the petition against Drambois and make declarations that:

(1) The Court has no jurisdiction to hold that section 200 of the Ordinance is incompatible with Article 26 of the Constitution and Article 545 of the Civil Code;

(2) Drambois has no obligation under Article 545 of the Civil Code to prove that the price paid for the shares was the fair and proper market value as the purchase of Ms. Lefevre’s shares was made under section 200 of the Companies Ordinance;

(3) Ms. Lefevre failed, neglected and refused to exercise the option under section 200 of the Ordinance to assent or dissent to the proposed transfer of shares and/or to indicate whether her dissent was based on the value of the transfer within the prescribed period and is therefore out of time to challenge Drambois’ acquisition of shares;

(4) Drambois complied faithfully with all the provisions of section 200 of the Ordinance but that Ms. Lefevre failed, refused and neglected to exercise the option to assent or dissent to the transfer of shares and/or to indicate whether her dissent was based on the value of the transfer and was therefore time-barred from challenging the said acquisition of shares;

(5) The purchase of Ms. Lefevre’s shares by Drambois is valid and in full force and effect and the transfer of shares should be registered;

(6) An order awarding costs to Drambois; and

(7) Any other or further orders that this court deems fit in the circumstances.

[15] The First, Third, Fourth and Fifth Respondents filed a joint answer dated 14 May 2018 to the petition. The reply includes pleas in limini litis, an amended version of which was filed later and is reproduced below. The reply requests that the Court dismiss the petition with costs and for any other orders that the court deems fit.

Pleas in limini litis

[16] Further to the pleas in limini set out in the Respondents’ answers to the petition filed in May 2018, separate pleas in limini were filed in July 2018.

[17] The pleas in limini litis of the First, Third, Fourth and Fifth Respondents dated 18 July 2017, and amended on 24 July 2017, is on the basis of the following:

(1) The petition is an abuse of the Court’s process since Ms. Lefevre has no right to challenge the decisions of the Company while she did not have a right to participate in taking such decisions. Ms. Lefevre has also brought various previous legal proceedings in respect of the same matter.

(2) Ms. Lefevre has no locus standi, as the cause of action taken by Ms. Lefevre has already been resolved by the judgment by consent dated 13 November 2014 in the case of Chung Faye v Beau Vallon Properties Ltd and ors CS No 117/06 (exhibit P20).

(3) The petition does not disclose a cause of action against the First, Third, Fourth and Fifth Respondents.

(4) There was no prejudice to the rights of Ms. Lefevre in the period of the share increase by the First, Third, Fourth and Fifth Respondents as they were not shareholders and directors at that time.

(5) Accordingly, the First, Third, Fourth and Fifth Respondents sought that the Court dismiss the petition on the plea in limini litis with costs and for all others as it deems fit.

[18] Drambois also filed separate pleas in limini litis dated 17 July 2017, and an amended plea on 20 July 2017, on the basis of the following:

(1) The petition contains no cause of action for unfair and prejudicial conduct under section 201 of the Ordinance against Drambois (ex facie the petition and affidavit):

(2) Ms. Lefevre has no locus standi to bring an action for unfair and prejudicial conduct;

(3) The petition is time barred under section 200 of the Ordinance to challenge Drambois’ acquisition of Ms. Lefevre’s share in BVP;

(4) The petition is not maintainable in law and constitutes an abuse of the court’s process, and should be struck out;

(5) Drambois is not liable for the past actions of the former directors of BVP.

(6) Drambois thus also seeks the dismissal of the petition with costs.

[19] The Respondents filed written submissions (separately) dated 11 October 2017. Ms. Lefevre filed written submissions dated 30 October 2017 on the pleas in limini litis made by the Respondents. Drambois filed additional submissions on 8 November 2017. Ms. Lefevre then filed ‘additional written submissions on the pleas limine litis of the Respondents’ on 1 November 2017, and another ‘response to submissions on plea in limine’ dated 8 June 2018.

[20] Drambois filed skeleton arguments on the plea in limini litis dated 4 June 2018. Ms. Lefevre filed further submissions dated 5 June 2018.

[21] The pleadings are set out above in extenso to reflect the difficulties encountered by the court in sifting out the irrelevant issues. The overabundance of pleadings even after warnings from the Court that these did not meet the requirements of the Seychelles Code of Civil Procedure seems to have fallen on deaf ears. The subsequent superfluity of evidence, repetitions, duplications, endless closing submissions and prayers do not facilitate the Court’s task, obfuscates the issues and otherwise complicates what could otherwise have been a simple case. In the end it frustrates the objectives of a court action. Nevertheless, this Court has to adjudicate and bring these matters to a conclusion, which I now propose to do.

The Hearing

[22] Hearings in this case took place from 11-14 June 2018, and then from 16-17 August 2018. A further hearing took place on 16 May 2019.

The Petitioner’s Evidence

Personal answers of Mr. Vadim Zaslonov

[23] Mr. Zaslonov was called on personal answers.

[24] Various personal questions were put to Mr. Zaslonov regarding the directors’ reports, financial statements and annual returns of BVP. He was specifically questioned on the loans (including shareholder loans) taken and debt owed by BVP. A loan from Tour & Tech was taken before Mr. Zaslonov became a director, and he explained that this loan was transferred to Concordia – at which point it became a shareholder loan. The loan had an interest rate of 9% according to annual returns, but no agreement was provided to the Court. The validity of this loan was questioned by counsel for Ms. Lefevre. A loan to Savoy Development was also raised.

[25] Mr. Zaslonov confirmed that he was Managing Director of Vertex Management and is currently Secretary of Savoy Development Ltd – which owns the Savoy Hotel. He could not recall the other companies that he had a role in since moving to Seychelles. He confirmed that he received a salary of USD 6,200 per month as Director of BVP.

[26] He was questioned about the role of the Guta Group in the dealings of BVP. He stated that he was not aware of any such dealings. Mr. Wilson referred to the agreement between Tour & Tech and the Guta Group which was signed a couple of days before he became director. The agreement was for the Guta Group to buy materials for the renovation of the kitchen at Coral Strand Hotel. Mr. Zaslonov denied knowledge of any of this. He also denied knowing Mr. Eduard Gevorkyan (lawyer for the Guta Group) stating ‘I knew this guy by this name, but I do not know who he is.’ When asked about the email regarding the sale of Ms. Ms. Lefevre’s shares with Mr. Gevorkyan, he denied any knowledge of this, saying that ‘Guta Group is just a big group as I know’. He was presented with an email sent to him Ms. Lefevre in which she explains that she had a meeting with ‘Alexander, Eduard, Denis and my mother to discuss the details of you buying me out.’ Mr. Zaslonov stated he didn’t know what this email was about, and he did not reply to it. When pressed on whether there was a connection between the Guta Group and BVP, he said: ‘I do not know how no connection, maybe there is some connections I do not know the personality because it is owned by Concordia, it is IBC. IBC can have some outer beneficial owner who just I do not know… [sic]’. He acknowledged that the Guta Group has an account with Coral Strand Hotel as a customer.

[27] Mr. Wilson also referred to an interest free loan made from BVP to Savoy Development Ltd, noted in the 2009 Directors Report. The report states that ‘the loan receivable is due from Savoy Development Ltd, an associated company. It has no fixed term of repayment and is interest free.’ Mr. Zaslonov stated that this was not a correct reference – as Savoy Development Ltd was not an associated company. As Secretary, he had no decision-making power in the running of Savoy.

[28] He confirmed that the shareholding companies of Drambois, Gilel and Efrat, were set-up by Vertex Management, when he was the Managing Director of Vertex. He was not aware of who subsequently bought these companies. He confirmed that Mr. Khlebnikov took over as director of Vertex Management after he left.

[29] Mr. Wilson moved on to enquire about the Judgment by Consent between BVP and Joseph Chung-Faye of November 2014 (exhibit P20). He noted that the Judgment by Consent was concluded several months after the Court of Appeal judgment that found that the share transfer to Ms. Lefevre was valid. He confirmed that there was no suggestion that Mr. Chung-Faye was acting on behalf of Ms. Lefevre. Ms. Lefevre was not made party to the settlement agreement. Mr. Zaslonov confirmed that he was aware of the judgment involving Ms. Lefevre. He explained though that his involvement in the judgement by consent was minimal and that Mr. Khlebnikov, the other director at the time, was more involved and signed the agreement on behalf of BVP. When asked about the risk of Ms. Lefevre bringing further action against the company regarding the same matter, he accepted that this might be so but that BVP’s lawyers thought it was ‘sensible’.

[30] Mr. Zaslonov denied knowledge of the letter sent to the Ministry in April 2013 by the General Manager of BVP regarding the issue of sanctions. Counsel noted that this was not actually a concern for BVP, but for Concordia. Mr. Zaslonov says he did not instruct the General Manager to write this letter.

[31] As regards Ms. Lefevre, he acknowledged that he met with her regarding selling her shares – though he said that this was just a possible development. He did not recall an offer being handed to him by Ms. Lefevre at this meeting.

[32] Mr. Zaslonov was also asked about the letter from Ms. Pool dated 25 July 2016 to Ms. Lefevre regarding the offer to purchase the shares of BVP. The letter noted that the offer price ‘is based on the annual returns of the company for the last five years …’ It was put to Mr. Zaslonov that, in the Respondents’ reply of 14 May 2018, it is noted that the annual returns for the company had not been completed. He denied this, stating that the information was available, but that the reports had simply not been filed with the registry. He explained that financial information was made available to Drambois which presumably informed the price it offered in respect of BVP in 2016. He did not personally make those records available to them but he knows they approached BVP and they had access to the books. He says he also ‘heard about’ a valuation prepared by ACM Auditors.

[33] Mr. Wilson then addressed the compulsory acquisition of Ms. Lefevre’s shares. Mr. Zaslonov explained that the ‘accounts clearly shows that the company is not profitable’. He further explained that, at the end of 2015, the company had unsecured loans of SR175 million ‘from different companies’. It was put to Mr. Zaslonov that the financial statement of 2015 shows that the company was making a profit, but carrying forward the losses from the year previously. It was suggested that this was being done for tax purposes, and that the company was actually not worthless when its profit and assets were taken into account. It was also put to him that Drambois’ offer of 1USD did not represent fair value of BVP, which he denied. Asked whether the shareholders were disappointed in Mr. Zaslonov for his handling of the company, he said that ‘sometimes business go wrong’ [sic] – denying any personal responsibility for the loss in value of the company since he took over as director.

[34] Mr. Wilson then turned to the AGM which took place in August 2015, at which Ms. Lefevre was not present. It was put to him that the meeting was inquorate under BVP’s Memorandum and Articles of Association. An adjournment should have been taken. Mr. Zaslonov could not recall if this happened. He stated that two local lawyers were at the meeting, Mr. Herminie and Mr. Chetty, and they advised that the meeting could go ahead without Ms. Lefevre present.

Evidence of Mr. Jean Paul Maurel

[35] Mr. Jean-Paul Maurel, real estate agent, testified that he was approached by a ‘senior person in Coral Strand’ to do a valuation of the land, building and business in 2015. The valuation report of Coral Strand was completed in early 2016. The total value of the company, including its moveable and immoveable assets, debt, total income and cash in hand was put at 27.844 million dollars (exhibit P22). The total debt was estimated to be around 12-15 million dollars, so he calculated its value at 15 million dollars. Mr. Maurel was cross-examined by Mrs. Aglaé, who challenged his expertise to provide the valuation. On re-examination, Mr. Maurel explained the methodology he used to prepare the report, which was the age-life method.

Evidence of the Deputy Registrar General

[36] Mr. Fred Hoareau, Deputy Registrar-General gave sworn evidence confirming that many of the annual reports of BVP were not filed on time, as per the Companies Ordinance. He explained that this was not, however, unusual: about 20% of companies are not ‘in good standing’ with the registrar. After taking advice from the Attorney-General, it was decided that companies that had not filed the appropriate documentation would be given until January 2019 to ensure that all annual returns etc. were filed, otherwise they would be fined. BVP complied with this notice.

Evidence of Mr. Patrick Lablache

[37] Mr. Patrick Lablache, a consultant for the Ministry of Habitat, Infrastructure and Land Transport, gave evidence on the retrospective sanction given in respect of BVP share transfers. He confirmed that the Concordia made an application dated 3 August 2007 for retrospective sanction. He stated that the issue had been a matter of correspondence and negotiations between Concordia and the Ministry. Mr. Lablache confirmed that the letter dated 6th September 2007 regularised the granting of sanctions for Field Nominees Ltd, Fenchurch Nominees Ltd, Hanneman and Concordia for share transfers. He noted that this was subsequently confirmed in the 2013 letter from Mr. Francois.

[38] Mr. Wilson questioned Mr. Lablache on apparent inconsistencies between his evidence in this case and a previous case (in 2012) in which he gave evidence. Mr. Lablache rejected any inconsistency, noting also that the previous case preceded the 2013 letter of Mr. Francois. This letter was in response to a letter from BVP to the Minister seeking clarification on the retrospective sanction granted. He averred that it was his view that the letter, written by the Principal Secretary who is the CEO of the Ministry, confirmed that sanction had been given in respect of the purchase of shares by Concordia and past transactions – i.e. that it gave retrospective sanction ‘to the whole transaction’. Mr. Lablache further confirmed that all conditions for the granting of the sanction had been complied with. It was his view that it was within the powers of the Minister to grant retrospective sanction, which would have the same effect as if it had been granted from the beginning.

Evidence of Ms. Low-Toy

[39] Ms. Low-Toy, Registry Manager at the Financial Services Agency (FSA), testified that the registry section of the FSA is responsible for the incorporation of international business companies, foundations and limited partnerships. Ms. Low-Toy confirmed that the certificate of incorporation for Drambois was issued by the domestic Registrar of Companies, not the FSA – it is therefore an onshore company. She was also asked about the certificates of Gilel Investments Ltd and Efrat Holdings Ltd – both of which are IBCs. The former was incorporated on 25 May 2012. The latter was incorporated on 28 May 2012. She confirmed that Vertex Management Ltd is the corporate service provider for the two IBCs. At the time that these companies were incorporated, Mr. Zaslonov was the director of Vertex Management. None of these companies have filed their register of directors and the deadline was 31 May 2018.

Evidence of Ms. Lefevre – the petitioner

[40] Mr. Elizabeth then called the petitioner, Ms. Natalie Lefevre, to testify. She confirmed that she acquired shares in BVP on 13 September 2005 from Mr. Joseph Chung-Faye (Mr. Chung- Faye). She paid 1 million Seychelles rupees for 213,280 shares. The share transfer was filed with the Registrar on 21 May 2007 (exhibit P31). She explained that she subsequently became aware that Mr. Chung-Faye was involved in litigation with BVP regarding two share dilutions. She averred that she tried to intervene in that litigation but the Judge did not allow her application for intervention. She found out in 2014, after the completion of the Court of Appeal litigation to which she was a party, that the matter had been settled by way of a judgment by consent.

[41] Counsel then asked her about the offer by Drambois to buy her shares, which was notified to her by Drambois’ counsel, Ms. Pool, by letter dated 25 July 2016 (Exhibit P32). As instructed, her lawyer responded to that letter on 2 August 2016. Ms. Pool further responded by letter dated 12 August 2016 (Exhibit P34). On 7 October, Ms. Pool sent another letter entitled ‘letter of notification’ regarding the acceptance by Concordia of the Drambois’ offer for its shares in BVP. This letter also noted that her shares would be compulsorily acquired (Exhibit P36). She explained that she instructed her lawyer to reply on the same day (Exhibit P37).

[42] She was asked by Mr. Wilson why she did not accept or reject the offer in her reply dated 2 August 2016 to Ms. Pool’s letter of 25 July 2016. She said: ‘I was advised by my lawyer that this letter did not contain true facts and that it was therefore not a valid offer and it is null and void.’ She also noted that the contents of Ms. Pool’s letter were not true and correct, as she conducted a search of Drambois and discovered that the companies that own it are IBCs – so sanction was required for the purchase (unlike what Ms. Pool averred in the letter).

[43] She explained her previous interactions with the directors of BVP. She met Mr. Zaslonov twice for meetings over lunch during which they discussed her offer to sell her shares in BVP for 4.5 million euro. She said that the meetings were friendly. She also had a few meetings with BVP’s lawyers – who invited her for dinner and drinks. The communication was consistent throughout. She explained that the Guta Group owns Concordia, and that she has met one of the owners, Mr. Gouchtchine in Moscow. That meeting was to discuss them buying her shares if she were to win the case in the Court of Appeal (the Chung-Faye challenge to the transfer of shares to her). Email correspondence between Ms. Lefevre and Mr. Eduard Gevorkyan was referred to (P39). Ms. Lefevre explained that she understood Mr. Gevorkyan was representing Concordia or Guta who wanted to buy her shares.

[44] After the 2014 Court of Appeal judgment, Ms. Lefevre emailed ‘them’ to continue negotiations. At this point, she was informed by Mr. Gevorkyan that the company was having some issues, and that it may now have to be sold. She offered to find a buyer and put them in contact with a Mr. Naguib Sawiris. She understood his offer for the purchase of BVP and its assets was around 35 million euros. She did not receive a reply to her email.

[45] Regarding the annual general meetings of BVP, Ms. Lefevre explained that she was only ever notified about one such meeting, which she thought was in 2014. She explained that she could not attend, but that she suggested another date for the meeting, and then if she could send a proxy – but that she received no reply. She noted that she never received information about the day to day operations of the company. She said she was not satisfied with how the company BVP had been run by the directors. She explained:

“They [the Directors] have been depriving me of many rights as a shareholder. They have kept me completely out in the dark. They have not provided me any annual returns. They have been filing annual returns completely late putting the company in jeopardy for penalties. They did not fulfil and satisfy peremptory rights that I had. They have been giving fictitious loans. They have been using the company for their own benefit and giving themselves many benefits, freebies, free booze, free stays, food for all the company friends. So they have been depleting assets, dissipating the assets and stripping me of a lot of rights and I had no knowledge and they haven’t been following their duties as directors” (Verbatim P. of the transcript of proceedings)

[46] She did not accept that BVP was worth 1 USD. She explained that she had been notified that 3.5 USD cents had been deposited in Mr. Andre’s account for her. She explained that she wanted the company to be investigated because she would like a neutral opinion on the evaluation of what the shares are worth and if it is possible to have correct annual returns that depict ‘the true story’.

[47] Mr. Wilson itemized the orders that Ms. Lefevre was seeking from the Court in the amended plaint. She confirmed that she was still seeking those orders. As regards the damages sought, she explained that the whole ordeal has caused her extreme stress. She had had to fly to Seychelles several times, having to pay the airfares, rental car costs and so on. She also referred to the mental stress and anguish.

[48] She was cross-examined by Ms. Madeleine, Counsel for Drambois. She explained that she considered that the offer in the letter of 25 July 2016 from Ms. Pool was not valid as she had done a search around the time of the offer and found out that Drambois, which made the offer, was an IBC. She therefore was advised by her lawyer that the offer was not valid, and that she need not respond to it. Ms. Madeleine put to her the statement in her affidavit of 7 February 2018 where she notes that she ‘recently’ discovered that Drambois was by definition a non-Seychellois company. Ms. Lefevre said that this was the wording of her lawyer and reiterated that she made the search around the time of the offer.

[49] Ms. Madeleine then referred to the Notice to Non-Assenting Shareholders (Exhibit P40). The notice includes the following statement:

“If these terms include the choice consideration you should within the prescribed time of the day of this notice inform the offeror in writing at…”

Ms. Madeleine then put it to her that she only filed a case against Drambois in April 2017 which was outside the 2 months for her to do so. Counsel thus put to her that she had failed to challenge the acquisition of the shares within the time set by the law. She disagreed.

[50] Mrs. Aglaé, counsel for the First, Third, Fourth and Fifth Respondents then cross-examined her. Ms. Lefevre confirmed that, when she acquired the shares, she knew that there was a risk of legal action from Mr. Chung Faye. Mrs. Aglaé then asked whether, when her case was ongoing against Mr. Chung Faye, she ‘put forward any case in respect of the authorized share capital’? Ms. Lefevre responded that she did not need to because she had an agreement with the Russians to pay her 1 million euro when the case with Mr. Chung-Faye was resolved. Mr Langer, former BVP director, also said that she would be ‘taken care of’. Mrs. Aglaé then asked her if she was aware that Mr. Chung-Faye had filed a petition for minority protection. She said she found out later and applied to intervene but it was denied. She stated that she did not know that she could have appealed this decision.

[51] Ms. Lefevre confirmed that she contacted Mr. Zaslonov and others after she won in the Court of Appeal so that they could proceed to purchase her shares as per the agreement that she says they had ‘negotiated and discussed’. She referred to a ‘formal signed letter’. She did not have a copy of that agreement, averring that she gave her copy to Mr. Zaslonov and that the copy was lost. She said that the only evidence of this agreement is therefore the emails she had with Eduard Gevorkyan and that she sent to Mr. Zaslonov.

[52] She confirmed that she received an email about the meeting regarding the amended memorandum and articles, and that she had proposed an alternative date (exhibit P39). As for post, she admitted that her postal address has changed frequently in recent times as she moves around a lot for work. She confirmed that her family’s property was opposite to Coral Strand Hotel, which she looked after. Mrs. Aglaé asked why she never went to the hotel to ask the directors questions personally if she had concerns. Ms. Lefevre said she did not stay at the property by the hotel when she was in Seychelles, and that she did raise her concerns with the directors. Mrs. Aglaé put to her that she had in fact taken little interest in the running of the company over the years.

[53] In her re-examination Ms. Lefevre was referred to the Accredo and Concordia agreement, dated 20 August 2007 (Addendum to the Agreement on the Assignment of Beneficial Rights dated 6 June 2007). According to this agreement, the value of 100% of the shares in BVP were 5,542,447 euro (Art II of the Addendum). There is also provision in this agreement that states(exhibit P11):

Subject to the provisions of art 7 hereof below, the Buyer shall within five business days pay to the bank account, specified in schedule F of the Agreement or as may be further specified by the Seller, the amount of euro one million … after assignment to the Buyer of the beneficial rights or title to an interest in JCF’s [Joseph Chung Faye] shares no later than November 15 2007.

[54] She explained that she understood this to mean that she would be compensated and receive her share as a shareholder in the company when Concordia bought her out. She was not, however, party to this agreement.

[55] She was referred to her email with Mr. Zaslonov dated 30 July 2015 (exhibit P39) in which she complained to the directors, and for which she received no reply. As regards the compulsory acquisition of her shares, she explained what she meant in the letter dated 7 October 2016 – that is, that she should first be offered the shares being sold by Concordia as that was her right as a member shareholder. She confirmed that the letter of 25 July 2016 was the first time she became aware that Concordia was selling its shares in BVP. She would have bought the shares for 1USD had she been offered them.

[56] Finally, she was asked about the letter dated 2 July 2007 regarding the sanction to purchase BVP (exhibit P26). This letter is from Minister Joel Morgan to Alexey Mokeyev, Head of Hotels Department, United Confectioners Holding Company, Moscow. She explained that, according to her research, this is a subsidiary company of the Guta Group. The letter identifies the net value of BVP as at 30 April 2007 as SR 51,005,479.66.

Evidence of June Lucy

[57] Ms. June Louisa Lucy, Senior Tax Officer, Seychelles Revenue Commission Domestic Taxes gave evidence that tax returns for BVP were filed consistently late (Exhibit P41A-E). She confirmed that she has received the business tax returns for BVP for year ended 30 December 2012, 2013, 2014 and 2015 – all of which were filed on 30 December 2016. The tax return for the year ending 2016 was filed on 28 November 2017. The 2017 tax return has not yet been filed. She acknowledged an error in the 2012 return, namely that an error in the profit and loss column of the business tax returns for BVP for the year ending 31 December 2012, submitted by Mr. Verkhorubov amounting to SCR49,103,608.00 was entered as SCR4,770,761.00. This was carried through to the later returns. Ms. Lucy confirmed that this had been identified by the Commission, but was dealt with by a different department.

Evidence of Mr. Nigel Roucou

[58] Mr. Nigel Roucou, a quantity surveyor and property consultant, testified that he had prepared a surveyor report dated 16 May 2018 (exhibit P42). The current market value of the property was put at SCR256,100,000.

The First, Third, Fourth and Fifth Respondents’ Evidence

Evidence of Mrs. Sumita André

[59] Sumita André, assistant registrar, presented the case files relating to CA 33/2011 and CA 36/2011 Beau Vallon Properties v Joe Chung-Faye – an appeal against the decision of Justice Renaud given on 4 July 2011 in CS 225/2007; Joseph Chung-Faye v Beau-Vallon Properties & Ors CS 117/2006 – seeking an order to cancel the latest increase of nominal share capital of the company before the last increase on 4 November 2005; Nathalie Lefevre v Beau-Vallon Properties & Ors CS 50/2015– seeking an order for an injunction preventing BVP from buying, selling, transferring or otherwise disposing of any immoveable properties, and Nathalie Lefevre v Beau-Vallon Properties & Ors CS 7/2016 – seeking rectification of the company register to return the nominal share capital of BVP to the position it was as at 8 September 2005 (see exhibit R1-1).

Evidence of Gemma Roberts

[60] Gemma Roberts, Auditor at Pool and Patel, who was responsible for auditing the financial statements of the BVP, testified. Ms. Roberts confirmed that she audited the financial statements of BVP for the years 2012, 2013, 2014 and 2015. During cross-examination, Ms. Roberts confirmed that she did not know when the audited statements were signed by the directors of BVP. She was specifically asked whether she requested to see underlying documentation in relation to the liabilities recorded in the audited reports. She said that: ‘I don’t know what exactly we would have requested to see but certainly we would request to see some underlying documentation yes.’ She did not know what documentation would have been provided in relation to the shareholder loans and other loans identified in the reports. She was clear that she would have satisfied herself that the loans were not ‘materially misstated’. She said they do not usually make copies of the documentation seen, but she stated: ‘I will have some notes or something in my file’. The Court requested to see these notes but they were never provided to the Court.

[61] Ms. Roberts was then asked about the 2008 annual report in which she gave a qualified opinion in relation to the shareholder loan recorded therein. In the 2008 report she stated in relation to the shareholder loan: ‘The evidence available to us was limited because we were unable to substantiate that this amount was due as at 31 December 2008.’ She noted that she presumes that she qualified her opinion because she didn’t see documentation in relation to that loan. She confirmed that, as per the financial statement of 2013, the equity of the company was in deficit and the company was able to trade due to the support it received from shareholders and long-term loans and advances.

[62] She was specifically asked about whether she saw any loan from a company called Zakya and stated that she could not remember. She said that she did not bring her audit file.

Evidence of Mr. Vadim Zaslonov

[63] Mr. Zaslonov, BVP Director since 2017, also testified. He explained that Ms. Lefevre was included in the shareholder register of BVP after the Court of Appeal judgment of 2014. He explained that relations between her and BVP were ‘very good’, but ‘that she wanted to get some money for herself this is all’. He averred that he met her in 2007 to discuss business, during which she raised selling her shares with him. He said that after that his communications were ignored. He says there was never an agreement between them regarding her shares.

[64] He denied ever having seen exhibit P10 (Act of Verification of indebtedness, liabilities, rights of BVP towards Concordia Investments Ltd) or having any knowledge of the agreements between Accredo and Concordia, and then between Tour & Tech and the Guta Group. He averred that the latter agreement was only made known to him this year. He was aware that Tour & Tech was the main lender to BVP previously, and was owned by Mr. Langer – former BVP director. He also denied any knowledge of any agreement between Mr. Langer and Ms. Lefevre. He averred that he had no personal knowledge of the letter from Mr. Francois to Mr. Verkhorubov dated 16 July 2013 (exhibit P27) which clarified the effect of the sanction granted to Concordia in respect of the shares acquired from Field Nominees Ltd, Fenchurch Nominees Ltd, and Hanneman Holdings Ltd.

[65] Regarding the extraordinary general meeting of August 2015 to adopt new articles and memorandum of the company, he noted that notice was sent to Ms. Lefevre’s registered address by mail and by email (see exhibit R1-13). He explained that she responded, but did not say whether she was going to attend the meeting or give warning that she could not attend. He confirmed that he sent her the approved resolution and new articles and memorandum (exhibit R1-14). He emphasized the importance of holding the meeting and adopting new articles and memorandum of the company as the former articles and memorandum were out of date, and no longer reflected the affairs of the company. He stated that he heard that Ms. Lefevre intended to challenge the change in the memorandum, but she did not communicate any objection to him directly. As for the 2016 meeting, he could not confirm if she was notified.

[66] He was also asked about the annual reports and financial statements of BVP. These reports show that BVP suffered losses in recent years. In 2012, for instance, the company filed a loss of 54 million rupees. He explained that these losses were a result of renovations to the hotel. The losses diminished in 2013.

[67] Questions were raised about a loan given to Savoy Development Ltd from BVP. He confirmed that BVP paid the invoice of Savoy for the construction of a carpark. He described it as an invoice advance for contractors of Savoy. The loan has since been repaid. He confirmed that he is also a director of Savoy, but that he does not have an interest in it. BVP also gave a loan to Eastern European Engineering. It has also since been repaid. Mr. Zaslonov confirmed that he was a director of Eastern European Engineering too, but has no interest in it. He said that these loans were approved at annual meetings of BVP and every year Concordia approved all activity undertaken in the past financial year. He did not recall any queries by Ms. Lefevre of any of the accounts of BVP.

[68] As regards Drambois’ offer to buy the shares of BVP, he confirmed that the transfer had not yet been registered pending the court’s decision. He confirmed that he omitted to notify Ms. Lefevre about Drambois’ offer to purchase shares in BVP. He also noted that he did not participate in the evaluation of BVP. The evaluation was done by ACM Auditors. He had however been advised that Drambois’ legal representative had notified Ms. Lefevre.

[69] In cross examination by Mr. Wilson, he was asked whether he accepted that Concordia Investments Ltd was part of the overall Guta Group. He said he did not know that. He confirmed that he was not aware that the Guta Group was involved in transactions between Accredo and Tour & Tech. He was also asked if he knew that Mr. Langer (former director) brought proceedings against the Guta Group in relation to an agreement between them. He said he knew nothing about that.

[70] He confirmed that he was previously a Director and company secretary of Vertex Management. He became a director in the Autumn of 2007 and resigned in 2013. Ms. Savy, who later became Ms. Stravens, was and remains an employee of Vertex Management. She is now also a Director of Drambois. Vertex also created the two companies that are shareholders of Drambois – Gilel Investments Ltd and Efrat Holdings Ltd (exhibits P17 and 18). Mr. Wilson highlighted the closeness between the various companies involved in the transfer. He put it to Mr. Zaslonov that Drambois ‘was a company essentially created within your group of companies and Vertex or Savoy Management Ltd or BVP…’ He denied this.

[71] Mr. Zaslonov confirmed that Drambois took over BVP which had, at the time, quite significant liabilities. He was asked about the unsecured loan from Zakya. He confirmed that that was ‘an offshore company incorporated by Vertex as well’ and that it is an IBC. When it was put to Mr. Zaslonov that IBC’s are not allowed to engage in banking activities in Seychelles under the IBC Act he replied that he did not consider it to be ‘banking activities’ as it was just a few loans – so Zakya was not engaging in banking activities. He confirmed that the only company making loans was Zakya. Zakya gave several loans to BVP, amounting to about SCR175 million. He said that the amount depended on the day: ‘some days it was less; some days it was more’. He said there was a loan agreement. He was then referred to the note in the audited report regarding shareholder’s loans and it was put to him that these loans actually came from Zakya, as the loan given by Concordia had already been mostly paid back over the years. He said: ‘this is the opinion of the auditors; they believe that shareholders keep investing in the company. It is their opinion but sometimes shareholders are not willing to do that.’ After being pressed, he confirmed that all other loans made after 2009 were from Zakya. Mr. Zaslonov admitted that some of the loans were advanced in euros. Mr. Wilson said that the nature of the loans raised suspicions of money laundering – specifically, he put to Mr. Zaslonov that the loans were fictitious insofar as overseas money has been taken as a loan, placed in a local bank account, and then paid back to the same place. Mr. Zaslonov denied this allegation. He did not, however, provide evidence such as bank account records to show that the loans were legitimate. Mr. Zaslonov confirmed that the Zakya loan was unsecured and no personal guarantees were required. Mr. Zaslonov confirmed that in the case of default nothing would happen. He also confirmed that he signed for it.

[72] The questions then turned to the value of the shares when Drambois sought to acquire them. Mr. Zaslonov noted that, it was his view that the offer of 1USD was reasonable. He stated that the hotel was not profitable. Questions were put to him concerning the ACM report. This report gave predictions for profit for the company for the year 2016-2020, with a profit increase year on year starting in 2017. He explained that ACM was given the management accounts to prepare the valuation because the annual reports were not ready. He also confirmed that the ACM report was not circulated to all shareholders. While he acknowledged that this was an omission, he did not accept that this was a breach of his director’s duties. He could not remember the details of the report.

[73] As regards his view of the petitioner, he says that she was only interested in ‘snatching’ some money for her shares – she never took part in the affairs of the company, nor came to the premises. He would not therefore have considered selling the company to her.

[74] Finally, he was asked about an email chain regarding what appeared to be an account for Guta at Coral Strand. He denied any knowledge of this email or the matter.

[75] On re-examination, Mr. Zaslonov confirmed that, in respect of the loans given by Zakya and any other loans given to BVP, there would be records. He said that all the loans would have been discussed with the shareholder (presumably, Concordia).

The Second Respondent’s Evidence

Evidence of Lucie Pool

[76] Ms. Lucie Pool, attorney at law explained the nature of her correspondence with Ms. Lefevre regarding the offer from Drambois and the acquisition of her shares. She sought to correct a statement in her letter dated 12 August 2016 – which responded to questions raised by Ms. Lefevre. In the letter, she said that there was no need for Drambois to seek sanction in order to acquire the shares. The shareholding companies of Drambois, however, were/are IBCs, so they would need to seek sanction.

[77] Ms. Pool received a letter from counsel acting for Concordia confirming acceptance of Drambois’ offer to acquire the shares in BVP.

[78] She confirmed that she relied on information provided by Drambois as regards the statement in her letter of 20 July 2016 that the price being offered was based on the last 5 years of annual returns and independent analysis of the market value of BVP shares. She did not personally have sight of these documents.

[79] She further confirmed that she sent a letter to Ms. Lefevre on 7 October 2016 titled ‘letter of notification’. Attached to this letter was a statutory declaration. On the same day, she received a response from Mr. Elizabeth. This letter did not however challenge the consideration being offered for the shares in question. In her view, the letter simply notified Drambois that the sale of the shares would be challenged in court. She clarified that her instructions from Drambois were very narrow: to write and send the two letters to Ms. Lefevre. She confirmed that she did not do any due diligence to ascertain the beneficial ownership of Drambois.

Independent share valuation

[80] On 17 August 2018, the Court granted Ms. Lefevre’s prayer for an order to value the shares of BVP so that the Court could make a proper assessment of the evidence in the case and come to a decision.

[81] On 16 May 2019, Mr. Peter Roselie, a business consultant, gave evidence. He compiled the report requested by the Court regarding the value of the shares in BVP. He confirmed that, in valuing the shares, he relied on financial accounts submitted to SRC and the Registrar of Companies from 31 December 2014-2017. Mr. Wilson suggested that, if the figures in the annual reports were not accurate or legitimate, then the final valuation would also be inaccurate and illegitimate. Mr. Rosalie deferred to his colleague, Mr. Moustache.

[82] Mr. Moustache, partner at Moustache and Associates, confirmed that the report was based on the assumption that all of the figures in the annual reports were legitimate. He further confirmed that if the liabilities were not legitimate or unlawful, then this would change the value of the shares, as it may not be necessary to deduct these sums from the company’s net asset. However, he noted that the auditors had confirmed the figures that they used. A concern was raised by Mr. Wilson that the liabilities had been double-counted in the report. This was accepted by Mr. Moustache who agreed to amend the report. Reasons were given for the other assumptions included in the report, for instance, growth rate and visitor rates.

[83] By letter dated 16 May 2019, Mr. Moustache sought to correct part of his testimony – specifically the correction he made in response to the apparent error identified by Mr. Wilson above.

[84] According to the report shares in BVP are valued at SCR14.58 per share. This was subsequently amended in the letter dated 16 May 2019 from Mr. Moustache, which amended that value to SCR 18.89 per share.

[85] Ms. Lefevre gave supplemental closing submissions dated 1 July 2019 on the effect and impact of the evidence given in the expert valuation report of Moustache & Associates dated 25 April 2019, and taking into account the letter of 16 May 2019.

Closing Submissions

The First, Third, Fourth and Fifth Respondents’ Submissions

[86] BVP, Concordia, Mr. Zaslonov and Mr. Khlebnikov have submitted in limine litis that the Petition is an abuse of process and is res judicata. They state that the Petition is in substance a complete re-litigation of previous matters contained in three cases before the Supreme Court namely, CS 117/2006, CS50/2015, and CS7/2016. In the present Petition Ms. Lefevre challenges the share purchase of previous shareholders namely Field and Fenchurch which was settled by the Court of Appeal in SCA 33 and 36 of 2011. The previous shareholder, Mr. Chung Faye who sold his shares to Ms. Lefevre brought the same action before the Supreme Court in CS 117 /2006 regarding the two increases of the authorised share capital and these matters were disposed of by way of a judgement by consent. Ms. Lefevre brought a case against Mr. Chung Faye claiming validity of the share transfer to her – which validity was confirmed in SCA 33 and 36/2011. Ms. Lefevre had been part of these proceedings and had not challenged the two increases in the authorised share capital, the issuance of new shares to Field and Fenchurch and sanction approval.

[87] The Respondents rely on the authorities of Gomme v Maurel SLR (2012) SLR 342 and Attorney General v Baker [2000] EWHC 453 (Admin) (16 February 2000) in support of their plea that Ms. Lefevre’s present action is an abuse of process. Henderson v Henderson (1843-1860) ALL ER 378 is also authority for the principle that litigants are precluded from advancing causes of action or arguments that they could have advanced in earlier proceedings.

[88] With respect to the plea of res judicata they submit that there is no relevant change in circumstances and Ms. Lefevre is merely repeating the application by Mr. Chung Faye in CS 117 /2006 which was settled in SCA 33 and 36/2011 and which she again attempted to do in CS 50/2015 and CS 7/2016, which actions were withdrawn. By accepting and admitting in those cases that her purchase of Joseph Chung Faye’s shares was valid she accepted the issuance of shares to Field and Fenchurch.

[89] The issues raised in CS 7/2016 and CS 117/2017 show that the issues raised are identical. In Arnold v Westminster Bank Plc 1991 2 AC 93, it was held that where an issue decided in a previous claim between the parties was central to the second and subsequent claims, the whole of the second and subsequent claims would be struck out. It also does not matter whether the order is made by consent or after arguments (Kenneth Utah Corporation v Minet Ltd 2002 EWHC 1622).

[90] In any case Ms. Lefevre has no standing to bring the present application, as she was not a registered shareholder in respect of the matters dealt with at that time and also no standing to engage in the decisions of BVP taken at that time.

[91] Further, the Petition is not maintainable in law as, though it is filed under section 201(1) of the Ordinance, the remedy claimed is not appropriate under the provision. There is no personal claim being made either under the company’s Articles or any rectification of the corporate documents sought. The remedies sought are of personal interest in terms of managing the affairs of the company and for monetary compensation. The breaches alleged are numerous and include the authorised increase of share capital in 2005, annual returns not having been submitted, and issuance of shares that was settled in SCA 33/36 of 2011, transfer of shares, and actions of directors which are all prescribed in time. However, these do not support the allegations of oppression of Ms. Lefevre’s rights as a shareholder.

[92] Similarly, the late filing or non-filing of annual returns are not prejudicial to Ms. Lefevre. As to the allegations that the loans made to Savoy Hotel were fictitious, this is not supported by evidence. The loans granted to the Savoy Hotel were well within the powers of the directors to authorise as was the loan to Eastern European Engineering Limited for the purpose of constructing a promenade which would benefit Coral Strand Hotel.

[93] Previous loans (to Zakya and Tour and Tech) that had been taken when Mr. Langer was director were carried over and remained on the company’s books when Concordia became a shareholder and Mr. Zaslonov and Mr. Khlebnikov when he became director.

[94] The increase and allotment of share capital was made in 2005 and Ms. Lefevre was not then a registered shareholder and consequently had no standing to challenge them. In any case the action is prescribed.

[95] With regard to the grant of sanction to Field and Fenchurch for the purchase of their shares in 2005, the power to grant the same retrospectively was within the powers of the Minister under the IPTRA. Ms. Lefevre was a party to the proceedings and did not challenge the decision and that her purchase of shares from Joseph Chung Faye was valid and legal for the number of shares she purchased and the amount she paid for them. Subsequently, both Field and Fenchchurch Nominee Limited sold their shares to Concordia in 2007 which was again not challenged.

[96] With respect to the amendment to the memorandum and Articles of the BVP, all procedures under section 18 of the Ordinance were followed. Ms. Lefevre failed to attend the meeting or appoint a proxy to represent her as she had done previously. She is therefore prescribed form challenging these matters now.

[97] There is no cause of action against BVP, Concordia, Mr. Zaslonov and Mr. Khlebnikov in respect to acts performed by previous directors. Concordia only became a shareholder in 2007 and Mr. Zaslonov and Mr. Khlebnikov only became directors in 2007 and 2013 respectively. They were not present in any capacity nor had any interest in the company for the issuance of shares to Field and Fenchurch and were also not responsible for the increase of the share capital. In any case the actions of the previous directors were within their powers and in compliance with the objects of the company.

[98] With regard to the role played by Vertex, a corporate service provider which was responsible for the incorporation of Gilel and Efrat, the attempt to show a link between Mr. Zaslonov who is also a director of Vertex is ill founded. It is normal for a corporate service provider to set up shelf companies as part of its business and there were no ulterior motives to the setting up of Gilel and Efrat with respect to Ms. Lefevre’s shares.

[99] In respect to Ms. Lefevre’s claim that the Accredo agreement safeguarded a payment of Euro 1 million for the shares she was holding, again this is not supported by evidence. The Accredo agreement only concerned the purchase of its shares by Concordia and Ms. Lefevre’s name is mentioned only for the purpose of informing the parties to the agreement that she had purchased Mr. Chung Faye’s shares.

[100] The Respondents submit therefore that the claim for damages are not made out and that Ms. Lefevre sat on her rights as a shareholder.

Submissions of the Second Respondent, Drambois.

[101] The Second Respondent, Drambois, has submitted that Ms. Lefevre’s case brought under section 201 of the Ordinance for the unfair and prejudicial conduct by the persons in charge of the management and control of the affairs of BVP and the challenge to the compulsory acquisition of her shares is prescribed and no action is maintainable against the Second Respondent as it is not and never has been part of the management and control of the affairs of BVP.

[102] Apart from the averment of an alleged collusion between Drambois, Mr. Zaslonov and Mr. Khlebnikov, for the purchase of her shares, Ms. Lefevre has not been able to establish a case of unfair, prejudicial and oppressive conduct against the BVP.

[103] With respect to the issue of whether sanction was obtained for the purchase of shares under the IPTRA, Ms. Lefevre’s action is not maintainable under section 201 of the Ordinance as such actions are only maintainable against persons in control of the affairs of the company.

[104] With regard to sanction itself and the fact that Drambois have two Seychellois IBCs as its directors (namely Gilel and Efrat) the lack of sanction is cured by a retrospective application by Drambois for the transfer of the shares. Section 8 of IPTRA permits the Minister to give retrospective validation of the transaction which is subsequently deemed valid ab initio. A challenge of this decision could have been brought by judicial review.

[105] The procedures for the compulsory acquisition of shares was followed to the letter: letters went out to Ms. Lefevre and to Concordia on 25 July 2016 and to Ms. Lefevre’s attorney on 2 August 2016 about the offer to Drambois to purchase shares. Ms. Lefevre did not answer the letters. On 7 October 2016 a letter of notification of the transfer together with a statutory declaration relating to a Notice to Non-Assenting Shareholders was again sent to Ms. Lefevre. The purchase of shares was not challenged within the two months prescribed period. The Petition was filed out of time by at least six months.

[106] The challenge regarding the inconsistency of section 200 of the Ordinance with Article 26 of the Constitution and with Article 545 of the Civil Code was not made in the petition and are not maintainable against Drambois.

[107] Concordia owned nine tenths of the shares in BVP and was entitled by virtue of section 200 of the Ordinance to acquire the shares of Ms. Lefevre who had been fully notified but failed to respond to the offer within the time stipulated in the letter of 25 July 2016.

[108] Finally, Drambois cannot be held liable for the past actions of the former directors of the BVP as these are not attributable to Drambois. It cannot be affected by any irregularity of procedure in connection to the authorisation of any transaction or the non-fulfilment of any condition imposed by the memorandum or Article in connection with the transaction

Ms. Lefevre’s closing submissions

[109] With respect to the plea of res judicata two separate issues have arisen, one, whether the post 2014 claims by Ms. Lefevre constitute claims which are res judicata and two, whether the previous Langer litigation specifically with respect to the retrospective validity given to Field to hold the additional BVP shares are to be considered res judicata.

[110] With regard to the first point of res judicata, it is submitted that the discontinuance of previous claims by Ms. Lefevre cannot amount to res judicata to preclude her from bringing a claim. The rules of procedure relating to the discontinuance of a suit does not bar the filing of a fresh claim on the same facts. The previous withdrawn suits were not dismissed by the court in a considered judgment and therefore no re-litigation of any claims brought by Ms. Lefevre took place.

[111] As for the second matter of res judicata, both the cases of CA 33/2011 and CA 36/2011 Beau Vallon Properties v Joe Chung-Faye and Joseph Chung-Faye v Beau-Vallon Properties & Ors CS 117/2006 which concluded with a judgment by consent do not deal with the issues raised in the present case namely the retrospective validity of a share transfer to a non-Seychellois entity.

[112] None of the elements as outlined in the case of Gomme v Maurel for a plea in limine litis to succeed exist in the present case, that is, there has been no adjudication by a court of the same subject matter, different parties are litigating against each other, and the subject matter, that is, retrospective validity of a share transfer to non-Seychellois has not been brought up or litigated in previous cases.

[113] With respect to the second issue, that is abuse of process, the Respondents have not been able to demonstrate how previous cases brought against them by Ms. Lefevre and withdrawn, amount to an abuse of process or whether any prejudice has been caused to them. The cases of Gomme, (supra) and Bragg v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1982] 2 Lloyds Rep 132 are to the effect that an attempt to re-litigate in another action issues which have been fully investigated in a former action may constitute an abuse of process. That is certainly not the case here.

[114] With regard to prescription, although section 200 of the Ordinance limits the time in which a challenge can be brought against a transfer of shares to two months after which notice has been received this only applies when the proper procedure for a takeover has been undertaken. There was no proper notice to the company, no proper dissemination of the offer by the directors and no advice given as to whether the offer was proper and fair value for the shares. Drambois was not an independent company, did not have locus standi to enter into the transaction which was therefore void. Hence the issue of validity and lawfulness of the share transfer to Field in 2005 is not prescribed and must as a matter of law be determined by this Court in order to properly dispose of the case.

[115] With regard to the issue of sanction for the retrospective validity of the share transfer, prescription does not apply as Mr. Lablache confirmed that no decision on Field’s application of retrospective validity would be made until after the conclusion of the case. There was therefore no decision made and no sanction granted. Hence if Field’s application is in abeyance its purchase of shares is void and unlawful and is not prescribed.

[116] It also not the case that the Zakya loan was already in existence when Concordia bought the BVP shares. The issue relating to this loan is not addressed, namely whether it was lawful under Seychellois law, whether it was a fiction whether it amounted to money laundering or whether it was used to extract further profit from BVP and how the loan was dealt with as between Drambois and Concordia in their agreement for the transfer of shares and where the source of the funds was the same entity to which repayments were being made.

[117] Ms. Lefevre has also submitted that no decision was ever made with respect to the grant of retrospective sanction to the transactions whereby Field purchased BVP shares in 2005. She submits that, although section 9 of IPTRA provides for documents purporting to be signed by the Minister or the Chief Executive Officer stating that the person named in the document has been granted sanction is prima facie evidence of the facts stated in the document, section 3 of IPTRA is categorical in its provision that the sanction must be granted by the Minister. In her submissions the letter of 6 September 2007 and 16 July 2013 from Principal Secretaries Veronique Herminie and Joseph François respectively do not amount to retrospective grants of sanction as only the Minister is empowered to do so pursuant to section 8 of IPTRA. She submits that Mr. Lablache’s evidence on this issue is equivocal.

[118] In consequence she submits that Field did not have any proper title to sell the increased shares to Concordia and that Concordia could only have validly held 396,090 shares in BVP. This would mean that Concordia holds no shares in BVP and that the additional 5,390,000 BVP shares issued between October and December 2005 remain un-allotted and should be redistributed.

[119] With regards to the section 200 procedure and the bona fides of Drambois’ offer to purchase BVP shares for USD 1, the Petitioner submits that the procedure was meant to ensure fairness to all shareholders and to ensure that the shareholders received fair value for their shares and that they were protected from any actual or perceived confits of interest arising in relation to the directors of the company whose shares were being purchased.

[120] She submits that Mr. Zaslonov and Mr. Khlebnikov are not independent directors and have not used their directorial duties in respect of the offer by Drambois properly. They have not been able to explain how Drambois were able to glean financial information from BVP accounts when no annual return had been made and on which a reasonable and legitimate offer could be founded. No proper information was disseminated by the directors to the shareholders on the offer.

[121] Properly speaking, a takeover offer pursuant to section 200 of the Ordinance would be for the transferor company (BVP) to make the offer to the transferee company (Drambois) via its company secretary so that the directors could assess the offer and make recommendations to the shareholders which clearly did not happen in the present case. The outstanding SR300 million Zakya loan is not given any consideration which raises questions as to the legitimacy of the proposed purchase by Drambois.

[122] Equally Zaslonov’s evidence that the failures to circulate the requisite documentation to the Petitioner as acts of omission belies the deliberate attempt to avoid any scrutiny of BVP’s finances by anyone other than the directors of Concordia or their beneficial owners and to rid BVP of the Petitioner who would disrupt the proposed transactions.

[123] In the circumstances the conduct of the directors amount to fraud and would negate the need for any challenge to the section 200 procedure and the application of the prescription period.

[124] With regard to Drambois, the Petitioner submits that it is not an independent entity and that is shareholders, Gilel and Efrat are IBCs set up and managed by Vertex Management Limited to which Mr. Zaslonov and Mr. Khlebnikov are directly linked. Drambois is clearly a vehicle set up by Mr. Zaslonov and Mr. Khlebnikov to frustrate the Petitioner’s claim against it. The fact that it is owned by two IBCs makes sanction a requirement for it to own shares in BVP. Ms. Pool effectively admitted this fact. The requirement for sanction means that the offer to purchase the Concordia shares was unlawful ab initio. Hence the section 200 procedure was never commenced and no challenge to it was required.

[125] With regard to the unfair prejudice and oppression to the Petitioner under section 201 of the Ordinance, she submits that this is made out in the serious misconduct of the two directors, Mr. Zaslonov and Mr. Khlebnikov. She submits inter alia, that their failure to file annual returns since 2007, failure to circulate these returns, failure to make timely tax returns exposed BVP to both financial and criminal sanction to the detriment of the company.

[126] On Zaslonov’s own evidence he took direction of a company in 2007 worth Euro 6 million and divested it of its share value to be worth only $1 to the prejudice of its shareholders. The directors also failed to properly scrutinise loans taken and the interest charged thereon and to provide information and justification for the same to the shareholders.

[127] Moreover, and significantly, the loan taken from Zakya appears unlawful and is being used for diversion of funds from a domestic or foreign source whether or not such funds were obtained lawfully in foreign currency and were being repaid directly to the same source from which it emanated or another and in this regard has exposed the company to serious criminal sanction.

[128] The mismanagement by the directors has either led to the company being worthless or a deliberate sham. It appears that Concordia has in fact taken profit from the company via the backdoor whilst diminishing its real profit, avoided to pay taxes to the government and dividends to its shareholders.

[129] She has also submitted that generally Mr. Zaslonov’s evidence was not credible and various instances are given. Similarly, she submits that Pat Lablache’s evidence was an attempt to twist his evidence in earlier cases in relation to the shares allegedly purchased by Field and the grant of retrospective sanction by the Minister.

[130] She submits that the Field application for sanction was on hold until the end of the Chung Faye cases and that therefore sanction was given to Concordia only for shares lawfully owned by Field, Fenchurch and Hanneman.

The issues to be determined by the Court

[131] With respect to the muddled pleadings, somewhat incoherent evidence and complex submissions, this Court must first eliminate some non-issues. In the Petitioner’s rather jumbled and somewhat disjointed Amended Petition the following averment and /or prayer is made:

“The Petitioner makes this petition seeking the following relief:

1. An order pursuant to section 107 of the Companies Ordinance for rectification of the share register…,

2. In granting such a relief as is requested…the Petitioner requests that the court make the following declarations…:

…

In respect of the agreement between the Second and Third Respondents to sell the shares of the First Respondent and the subsequent attempt by the Second Respondent to trigger the provision of section 200 of the Companies Ordinance:

1. Generally, that section 200 of the Companies Ordinance requiring that a minority shareholder… is forced to transfer property, is incompatible with section 26 (sic) of the Constitution… and Article 545 of the Civil Code…” (emphasis added)

[132] However, the Petition then goes on to detail further averments and orders the Court might deem fit to make and then ends with the prayer:

“Wherefore the Petitioner prays this Honourable Court to give judgement in favour of the Petitioner and make the following orders:”

[133] The orders then prayed for do not include a declaration that any particular provision of the Companies Ordinance is unconstitutional or incompatible with the Civil Code.

[134] The Court is therefore left to wonder what remedies are being prayed for and whether the averments amount to constitutionality referrals. The fact that the Petitioner did not raise or submit on this issue at all either in the proceedings or submissions leads this Court to the conclusion that this averment is frivolous and vexatious and does not warrant a referral to the Constitutional Court. Similarly, the alleged incompatibility of section 200 with Article 545 of the Civil Code is nonsensical and merits little comment. For these reasons, these are therefore not issues for this court to determine.

[135] I have tried to distil from the great morass of averments, wish list and prayers the following key issues in this case to be determined are as follows:

(1) Whether the pleas in limini litis filed by the Respondents have been successfully established.

(2) Whether the grant of sanction made under the IPTRA in respect of the acquisition by Field Nominees Ltd of shares in BVP was valid.

(3) Whether Drambois’ acquisition of shares in BVP was bona fides and valid.

(4) Whether Ms. Lefevre was treated oppressively under section 201 of the Companies Ordinance.

1. Whether the pleas in limini litis filed by the Respondents have been successfully established.

Res Judicata

[136] The Respondents have raised, in their plea in limine litis, that the petition is res judicata and an abuse of the court’s process. Thereunder, they have contended that this matter is a re-litigation of previous cases before the court.

[137] Previous cases entered into evidence during the course of the hearing include –

(1) CS 117 / 2006 In the matter of Beau-Vallon Properties Limited & in the matter of section 201 of the Companies Act, Joseph Chung-Faye v Beau-Vallon Properties Limited, Hans Lavigne, Fenchurch Nominees & Phil Nominees Limited – nature of action was an order to cancel the latest increase of nominal share capital of the company to what it was before the 4 November 2005 increase.

(2) CS 225 /2007 Joseph Chung-Faye v Beau Vallon Properties.

(3) CA 33/11 Nathalie Lefevre v Joseph Chung-Faye – appeal against the decision on 4 July 2011 in CS 225 of 2007.

(4) CC 7/2016 Nathalie Lefevre v Beau-Vallon Properties, Concordia Investment Limited, Phil Nominees Limited, Fenchurch Nominees Limited – nature of action was an order for the rectification of the company register so as to return the nominal share capital of BVP to the position it was as at 8 September 2005.

(5) CC15/2015 Nathalie. Lefevre v Beau-Vallon Properties, Phil Nominees & Fenchurch Nominees – nature of action was an order for an injunction preventing BVP, whether through its Board of Directors, shareholders or members of four ultimate beneficial owners, from buying, selling, transferring or otherwise disposing of any immovable properties.

[138] Relying on Gomme (supra) Ms. Lefevre has submitted that the plea of res judicata cannot succeed. The Respondents have relied on the same authority and have submitted that there is unity of issues, parties and cause of action between the present case and previous cases.

[139] It is trite that there are three pre–requisites for a successful plea of res judicata (Gomme (supra) Attorney-General v Marzorcchi (1996-1997) SCAR 225): the subject-matter should be the same, the cause of action should be the same, the parties should be the same, the previous judgment should be a final judgment of a court of competent jurisdiction. As was stated in Zena Entertainment v Lucas & Ors (SCA 04/2013) [2015] SCCA 48 (17 December 2015):

“Res judicata involves a reiteration of the same subject matter between the same parties in their same capacities. Hence a matter that has been litigated and judged cannot be re-litigated.”

[140] In the present suit it cannot be said that the parties, the subject-matter and the cause of action in the previous cases are identical to that of the present suit, although there are similarities in the issues which arise and the parties involved in one way or another. While Ms. Lefevre has attempted to challenge the increase to the share capital of BVP in previous cases, the present suit is based on the alleged oppressive conduct of Mr. Zaslonov and Mr. Khlebnikov towards Ms. Lefevre and their alleged serious misconduct or breaches of duty, which have served to prejudice Ms. Lefevre. Where the objects of multiple proceedings are different, the plea of res judicata cannot be sustained (Julienne v Julienne [1992] SLR 121).

[141] A claim that renews an issue which has been previously decided would also be redundant on the ground of res judicata (Botel v Ruddenklau [2001] SLR 241). Ms. Lefevre withdrew her previous claims before the Court pursuant to section 182 of the Code of Civil Procedure before a final decision could be handed down. Therefore, the principle of res judicata cannot operate (see Clarisse v Sophola [2005] SLR 96; FIU v Barclays Bank [2011] SLR 369).

Abuse of process

[142] With regard to the issue of abuse of process, the Respondent’s plea is linked to that of their submissions relating to the present matter being res judicata. Domah JA in Gomme (supra) established that res judicata is a subset of abuse of process and that abuse of process encompasses more situations, inter alia:

“where it is manifest on the facts before the court that advisers are indulging in various strategies to perpetuate litigation either at the expense of their clients who may be hardly aware or at the instance of their clients who have some ulterior motive such as of harassing parties against whom they have brought actions or others who may not be parties. Courts have a duty to intervene to put a stop to such abuses of legal and judicial process.”

[143] There is in the present matter reference to previous cases concerning the entity Beau Vallon Properties. Undoubtedly, issues relating to this company have been problematic for over a decade. However, having read the decisions and scrutinised the associated court files I am of the view that the cases have been brought because shareholders have either always felt oppressed or hard done by the directors of the company or the majority shareholders in the company. This says more for the management style of the company than an abuse of the court process by the aggrieved shareholders. Perhaps Ms. Lefevre should have been more streetwise in terms of getting into bed with the entity but her present case is not an abuse of process. Rather, it is viewed by the Court as an attempt to vindicate her rights as a shareholder.

Standing

[144] The Respondents further allege that Ms. Lefevre has no standing to bring the said suit, given that she was allegedly not yet a registered shareholder at the material time of the matters complained of in this suit. Ms. Lefevre admits that she became a shareholder following the Judgment in cases SCA 33 and 36 of 2011, following protracted disputes as to her interest in the company. Mr. Zaslonov gave evidence that Ms. Lefevre was only registered as a shareholder on the company register in August 2014.

[145] Section 23 of the Ordinance requires the name of a member to be entered in the company’s register of members in order for them to be deemed to be a member of the said company. Subsection (3) thereof includes in its definition of a ‘shareholder’ a person who is on his own behalf in possession of a bearer share certificate, whether by himself or by an agent acting for him.

[146] Section 84 of the Act allows for the transfer of shares by way of a written instrument, signed by the transferor and transferee and containing details of the number of shares transferred and the nominal value of these shares. A person desirous of acquiring shares have them transferred to him in pursuance of a contract of sale or other transaction. A formal contract is not necessary; if, in substance, an agreement is made, the form is not material (Ritso’s Case (1877) 4 Ch. D. 782).

[147] Exhibit R (1) 12 (Share Transfer Form dated 13 September 2005, duly registered with the Registrar General) confirms that Ms. Lefevre was transferred 213,280 shares in BVP company for the value of SR4.69 per share (total consideration: SR1, 000,000) by Mr Chung-Faye.

[148] Ownership in the shares passes upon the delivery to the transferee of the signed instrument of transfer along with the share certificate for those shares. The seller’s duty is performed when he hands over to the buyer a duly executed instrument of transfer, together with the certificate or its equivalent (Skinner v City of London, etc., Corporation (1885) 14 Q.B.D. 882). Within two months after allotment or transfer of shares, the company must issue to the new shareholder a share certificate in respect of the shares allotted or transferred (section 87). Upon a valid instrument of transfer of shares, duly signed, being presented to the company, the company must register the new member as a shareholder in respect of these shares (section 88). The share register kept by the company is the record of the shareholding therein and a certificate from the company is prima facie proof thereof (section 108). A transferee under a valid transfer has an absolute right to be registered unless the company has a power to refuse to register and has effectively so refused (Re Hackney Pavilion (1924) 1 Ch. 276).

[149] The Transfer of Shares document in Exhibit R (1) 12 is sufficient to show that Ms. Lefevre was a shareholder in BVP as at 13 September 2005. Therefore, Ms. Lefevre has standing to challenge the October 2016 agreement between Drambois and Concordia.

Prescription

[150] Ms. Lefevre accepts in her closing submissions that she failed to bring a challenge to the share transfer to Drambois within the two-month time limit as prescribed by section 200 of the Companies Ordinance. She submits, however, that a challenge could only be brought where the procedure for takeover had been undertaken properly. She further submits that the agreement between Drambois and Concordia was void ab initio given its lack of sanction, stating, “it is from the outset unlawful and [Drambois] had no capacity to enter into the agreement or even make an offer to purchase.”

[151] Drambois contends that it is a domestic company having two international business companies as its shareholders and two Seychellois citizens as its Directors. Furthermore, it claims that in 2016 it initiated procedures for the acquisition of shares in BVP. It maintains that the procedures under section 200 were complied with, and that Ms. Lefevre failed to exercise her rights under the same section by not assenting or indicating her dissent to the offer made to purchase her shares for 0.035 USD within the prescribed time. Ms Lucie Pool confirmed in evidence that Ms. Lefevre was sent a letter regarding the offer for Drambois to purchase Ms. Lefevre’s shares dated 25 July 2016 (exhibit R2 (2)). The time limit of 2 months was specified therein. Ms. Lefevre’s counsel, Mr Elizabeth, responded by way of letter dated 2 August 2016 with a request for more information. Drambois responded to this letter on 12 August 2016 (exhibit P34).

[152] Ms Pool conceded that because Drambois’ shareholders were international business companies, Drambois would need sanction from the Government for a purchase of shares in a company that owned immovable property.

[153] She gave further evidence that a similar letter of offer was sent to Concordia, which was responded to on 2 September 2016 (exhibit R2 (3)), wherein Concordia indicated their acceptance to sell their shares in BVP. While Ms. Lefevre was offered 0.035USD cents (1 cent for 1% of shares) because she held 3.5% of the shares in BVP, Concordia was offered 96.5USD cents (1 cent for 1% of shares) because they held 96.5% of BVP.

[154] Ms Pool stated that she sent a letter of notification dated 7 October 2016 to Mr Elizabeth, who was acting on behalf of Ms. Lefevre (exhibit P32). Attached thereto were statutory declarations relating to notice to non-assenting shareholders (exhibits P35 & P40). Mr Elizabeth responded, by way of letter dated 7 October 2016 (exhibit P37), indicating that Ms. Lefevre would be challenging the sale of shares in court. Ms. Pool testified that prior to this date, she was not informed that the sale was being objected to.

[155] A company is a resident of Seychelles if it carries on business in Seychelles in a defined place; nationality and place of residence of the directors are not criteria for determining the residence of a company, nor is the size of the company’s share capital (Village Management v Geers (1995) SCAR 187).

[156] It is clear from the facts that Drambois did not have the requisite sanction at the time of acquiring the shares, more so because of the fact that a request for retrospective sanction was made subsequent to the agreement. The lack of sanction at the material time is a criminal offence under section 6 of the Immovable Property Transfer Restriction Act (hereinafter IPTRA) but is curable under section 8 of the same, which makes provision for retrospective sanction. However, no retrospective sanction has to date been granted by the Minister.

[157] Section 3 of the IPTRA provides as follows –

“3. (1) A non-Seychellois may not -

(a) purchase or acquire by any means whatsoever and whether for valuable consideration or not, except by way of succession or under an order of the court in connection with the settlement of matrimonial property in relation to a divorce proceedings any immovable property situated in Seychelles or any right therein; or

(b) lease any such property or rights for any period; or

(c) enter into any agreement which includes an option to purchase or lease any such property or rights, without having first obtained the sanction of the Minister.

(d) For the purposes of subsection (1) it is immaterial whether the purchase takes place himself is not prevented from purchasing without sanction, provided that there is an ultimate transfer for valuable consideration to a person who is prevented from purchasing without sanction.

(e) A financial institution which is a non-Seychellois shall not require sanction to purchase property which is burdened by a mortgage in favour of the said financial institution and which is sold by a Judge under the Immovable Property (Judicial Sales) Act.

(f) A court shall not make an order or decision which would have the effect of contravening or circumventing subsection (1).

[158] Furthermore, section 5 of the same provides as follows –

“5. Any transaction effected in contravention of the provisions of sections 3, 4, 7(1) or (2) or 12 shall be unlawful and void, and in the case of a sale, any immovable property or rights therein purporting to have been transferred under such sale shall be forfeited to the Republic.”

[159] In this regard, Article 1134 of the Civil Code provides:

“Agreements lawfully concluded shall have the force of law for those who have entered into them.

They shall not be revoked except by mutual consent or for causes which the law authorise.

They shall be performed in good faith.”

[160] Articles 6, 1108 and 1133 of the Civil Code also provide –

“Article 6. It shall be forbidden to exclude the rules of public policy by private agreement. Rules of public policy need not be expressly stated”

“Article 1108. Four conditions are essential for the validity of an agreement-

The consent of the party, who binds himself,

His capacity to enter into a contract,

A definite object which forms the subject matter of the undertaking,

That it should not be against the law or against public policy.”

“Article 1133. The object of an agreement is unlawful when it is prohibited by law or when it infringes the principles of public policy”

[161] Although Ms. Lefevre would be, under normal circumstances, prescribed by virtue of the time limit imposed under section 200 of the Companies Ordinance, the agreement between Drambois and Concordia is evidently void ab initio, given its lack of sanction, and accordingly, Drambois lacks capacity to enter into the said agreement.

No cause of action

[162] The Respondents, namely BVP, Concordia, Mr. Zaslonov and Mr. Khlebnikov have also submitted that the petition discloses no cause of action against them as the acts of directors complained of were performed by previous directors or before Concordia had obtained shares in the company. Insofar as those acts are concerned there is no difficulty in finding that they would not be responsible for those acts. However, the petition discloses other matters which are directly related to them as parties and will be dealt with below.

[163] In the circumstances the pleas in limini litis are dismissed.

2. Whether the grant of sanction made under the IPTRA in respect of the acquisition by Field Nominees Ltd of shares in BVP was valid.

[164] It must be noted that the share capital of BVP was increased twice: the first time on 14 October 2005 and the second time on 5 November 2005. The evidence reveals the following:

(1) FIRST INCREASE: Authorised share capital increase on 14 October 2005 from SR6,100,000 to SR16,000,000 with an increase in the number of shares to 1,600,000 ordinary shares of SR10-/. All unissued shares were allotted to Field Nominees Ltd on 15 October 2005.

(2) SECOND INCREASE: Authorised share capital increase on 5 November 2005 from SR16, 000,000 to SR60, 000,000, with an increase in the number of shares from 1,600,000 shares of SR10-/ to 6,000,000 ordinary shares of SR10-/ each. All unissued shares (4,400,000 ordinary shares) of SR10-/ were allotted to Field Nominees Ltd on 10 December 2005.

[165] The directors at the time were Hans-Jurgen Langer (21/01/1994 – 06/09/2007) and Zahra Langer (11/08/1995 – 06/09/2007). See exhibit R1-15.

[166] The allotment of shares prior to the two share increases in 2005 was as follows:

(1) Field Nominees Ltd: 203,387 shares.

(2) Fenchurch Nominees Ltd: 180,036 shares.

(3) Hanneman Holdings Ltd: 12,667 shares.

(4) Natalie Lefevre: 213,280 shares.

[167] The allotment of shares after the share increases was therefore as follows (see exhibit R-1 7):

(1) Field Nominees Ltd: 5,594,017 shares

(2) Fenchurch Nominees Ltd: 180,036 shares

(3) Joseph Chang-Faye / Natalie Lefevre: 213,280 shares

(4) Hanneman Holdings Ltd: 12,667 shares

[168] Mr. Chung-Faye brought an action regarding the increase in share capital (CS No 117/06 of 2006) which was disposed of by way of a judgment by consent in the matter of CS No. 117/06. The petitioner in that case was Joseph Chung Faye, and the respondents were: BVP (1st respondent), Hans-Jurgen Langer (2nd respondent), Zahra Langer (3rd respondent), Fenchurch Ltd (4th respondent), and Field Nominees Ltd (5th respondent). The judgment by consent is dated 13 November 2014.

[169] The Court finds that, at the time of the share transfer, Ms. Lefevre had acquired Mr. Chung-Faye’s shares. She acquired 213,280 shares for SCR1, 000,000 by way of a share transfer form signed on 13 September 2005 and registered with the registry on 21 May 2007. Her shareholding was registered in the member’s register on 11 April 2014 as per court case SCA 33 of 2011 and SCA 3 of 2011. Prior to this, the shares were in the name of Joseph Chung-Faye. The Court of Appeal decision (SCA 33 of 2011 and SCA 36 of 2011, delivered 11 April 2014) confirmed that the transfer of shares from Mr. Chung-Faye to Natalie Lefevre on 13 September 2005 was valid.

[170] With regard to the share transfer to Concordia from Field Nominees Ltd and the issue of retrospective sanction, the documentary evidence shows that in 2007, the following shares were transferred to Concordia (see exhibit R (1) 11):

All of the shares owned by Field Nominees Ltd (now amounting to 5,594,017 shares) were transferred for SCR49, 945,608 by share transfer form dated 5 September 2007 and registered on 11 September 2007. (P30).

All of the shares of Fenchurch Nominees Ltd (180,036) transferred on 11 September 2007 for SCR1, 607,433 by share transfer form dated 5 September 2007 and registered on 11 September 2007.

All of the shares of Hanneman Holdings Ltd (12,667) transferred on 8 November 2007 for Euro 200,000 by share transfer form dated 5 November 2007 and registered on 8 November 2007.

[171] As noted above, sanction for the purchase of the above shares by Concordia was not granted at the time in accordance with section 12 of IPTRA.

[172] By letter dated 2 July 2007, Minister Morgan noted that ‘[s]tamp duty is to be paid to the Government of Seychelles on the net value of the ultimate shares of [BVP] as at 30 April 2007 owned by the following offshore companies namely Field Nominees Ltd, Fenchurch Nominees and Hanneman Holdings at a rate of 5% in US dollars equivalent’ (exhibit P26). By letter dated 20 July 2007, Minister Dugasse granted sanction retrospectively ‘for the purchase by Concordia of the shares held by Field Nominees Ltd, Fenchurch Nominees Ltd and Hanneman Holdings in Beau Vallon Properties Ltd’ (exhibit P25). The total cost of all of the shares in BVP as at 30 April 2007 was SR51, 005,479.66. The letter dated 16 July 2013 from the Principal Secretary to Mr. Verkhorubov, General Manager of Coral Strand Hotel, confirmed that:

“…the Minister granted sanction to Concordia Investment Ltd to purchase all the shares of Field Nominees Ltd, Fenchurch Nominees Ltd, and Hanneman Holdings Ltd and that such sanction was of retrospective nature and renders any past transactions regarding the said shares, namely the allotment of 990,630 and 4,400,000 ordinary shares to Field Nominees Ltd, lawful under the [IPTRA].”

[173] The evidence of Mr. Lablache from the Ministry of Habitat, Infrastructure and Land Transport was clear on this point. He averred that the letter dated 6th September 2007 (exhibit P28) from Principal Secretary Herminie had the effect of regularising or legalising the granting of sanctions for Field Nominees Ltd, Fenchurch Nominees Ltd, Hanneman and Concordia. The Court notes that Mr. Lablache’s evidence in this regard differs from that given in the case of Chung-Faye v Beau-Vallon Properties & Ors CS 117 of 2006. In the transcript of the hearing on 5 September 2012 at 1.45pm from pg. 61, Mr. Lablache indicates that he considered that the sanction granted by the Minister in 2007 to Concordia did not cover the acquisition of the shares that Field had acquired as a result of the share increase, because Field did not have sanction to acquire those shares and thus did not legally own them. In the present case, Mr. Lablache explained that it is now clear that the sanction did in fact cover all the shares owned by Field. He specifically referred to the letter dated 16 July 2013 (exhibit P27) from Mr. Francois, Principal Secretary of the Ministry, which made it clear that it was the intention of government to grant sanction to the whole transaction. Mr. Lablache confirmed that the Principal Secretary is the CEO for the purposes of IPTRA.

[174] Whether the granting of retrospective sanction by the Minister was improper or not is not an issue to be entertained by this Court in the present case. They do not form part of a judicial review exercise and were in any case not challenged within the statutory limitation period. The Court accordingly finds that both the transfer to Field Nominees Ltd of the unissued shares as a result of the two share increases in 2005, and the subsequent acquisition of the shares by Concordia of the shares from Field Nominees Ltd, Fenchurch Nominees Ltd, and Hanneman Holdings Ltd in 2007, received the necessary sanction for the purposes of IPTRA.

3. Whether Drambois’ acquisition of shares in BVP was bona fides and valid.

Amendment to the Memorandum and Articles of Association

[175] The Court finds that notification of an extraordinary meeting to be held on 14 August 2015 to adopt new Memorandum and Articles of Association (M & A) for BVP was sent to the Ms. Lefevre on 23 July 2015 by email (exhibit R1-13). The new M & A was attached to this email. The notice is affixed with a seal from Lucie Pool that it was sent electronically on that date. Evidence was also provided that notification was provided by post. Ms. Lefevre admitted under cross-examination that she received an email about this meeting. The Court accordingly finds that Ms. Lefevre was notified in advance of this meeting.

[176] Ms. Lefevre was not present at the meeting which took place on 14 August 2015. The new M & A was adopted by a resolution of members present (exhibit R1-14) and registered on 1 March 2016. The minutes of the meeting note:

‘Ms. Nathalie Lefevre did not show up. After 20 min of waiting the Chairman has noted that the number of shares authorized to vote is sufficient for voting and in accordance with the Articles of Association of the Company and declaring the meeting open.’

[177] Concordia was the only shareholder present at the meeting (see exhibit P14). Under BVP’s Memorandum and Articles of Association, an adjournment should have been taken (exhibit P24, cl.16 and 17). Mr. Zaslonov said in evidence that he could not recall if this happened. The date of the meeting indicates that the necessary adjournment was not taken. The meeting was therefore inquorate. The new M & A are therefore invalid.

[178] This has implications for the compulsory acquisition of Ms. Lefevre’s shares in 2016 which is addressed below. The compulsory acquisition was carried out according to the new M & A which was, as per the finding above, invalid. The previous M & A was / is therefore still valid. Under the previous M & A (exhibit P24), provision is made for the acquisition of shares by a shareholder with at least 80% of the company shareholding. However, the process set out in the previous M & A – namely that the holders of at least 80% of the issued capital serve the company with a requisition for the transfer of shares, give notice to the shareholders of the same etc. – was not followed in this case (see cl. 11(f)). The compulsory acquisition was not therefore conducted in accordance with the company’s M & A.

Compulsory acquisition of Ms. Lefevre’s shares

[179] The Court makes the following findings on the evidence regarding the compulsory acquisition of Ms. Lefevre’s shares.

[180] On 25 July 2016, Ms. Pool, counsel for Drambois, notified Ms. Lefevre of an offer to purchase her shares in BVP. The letter (exhibit P 32) stated:

“I, Lucie A. Pool, acting on behalf of the Company Drambois Investment Ltd propose an offer to purchase 213,280 shares of the Company Beau Vallon Properties Limited for the sum of 3.5 cents USD as per 1 cent for 1% of shares since you hold 3.5% of shares of the company Beau Vallon Properties Limited.”

[181] The said price is based on the annual returns of the Company for the last five years and independent analysis of the market value of shares of the Company Beau Vallon Properties Limited.

[182] The price offered was notably low or even derisory. Ms. Pool gave evidence that she had not herself been provided with information regarding the price offered: she was only instructed to write the letter. Mr. Zaslonov said that Drambois had been given access to BVP’s financial information, and had also commissioned a valuation from ACM Auditors. A representative of Drambois did not appear to give evidence. The ACM Auditors’ report was not provided to the Court.

[183] Ms. Lefevre was given two months upon receipt of the letter confirming whether she accepted or rejected the offer.

[184] On 2 August 2016, Mr. Elizabeth replied to the letter on Ms. Lefevre’s behalf asking for details of the prospective sale, including the total price being offered, and regarding the prospective buyer (exhibit P33).

[185] By letter dated 12 August 2016, Ms. Pool replied to Mr. Elizabeth responding to the questions therein. In particular, she noted that:

“The offer was 1 USD per 100% of the shares of the company, therefore the total price that was offered to Natalie Lefevre for 3.55% of shares of the Company is 0.035 USD.”

[186] Ms. Lefevre did not respond to this letter. She avers that she was advised by her lawyer that the offer was invalid because – contrary to what Ms. Pool stated in her letter – the proposed buyer was not a Seychellois company, and therefore needed to obtain sanction in order to proceed.

[187] By letter dated 2 September 2016, counsel for Concordia informed Ms. Lefevre of the Board Resolution passed on 15 August 2016 whereby Concordia accepted Drambois’ offer (exhibit R2-3).

[188] On 7 October 2016, Ms. Pool notified the petitioner by letter, subject: Letter of Notification (P36). This letter stated:

“I, Lucie A. Pool, acting on behalf of the Company Drambois Investments Ltd., would like to inform you that on 8th September 2016, Drambois Investments Ltd received an acceptance of the offer from Concordia Investment Ltd to transfer 5,786,720 shares of the Company Beau Vallon Properties Ltd for the sum of 96.5 cents USD as per 1 cent for 1% of the shares of the Company.”

At the same time, I have received a letter from Mr. Frank Elizabeth dated as 2nd August 2016 requesting the information concerning the process of purchase. The reply was sent shortly. However, neither acceptance of the offer nor dissent of the offer from your side was obtained. Since Concordia Investment Ltd holds 96.5% of the shares of the Company Beau Vallon Properties Ltd which constitutes the majority of the shares, Drambois Investments Ltd, is entitled to acquire the rest of the shares of the Company Beau Vallon Properties Ltd.”

[189] The notification and declaration in accordance with Article 200 of the Ordinance was enclosed – see exhibit P40 (notice to non-assenting shareholders, dated 6 October 2016).

[190] On the same date, being 7 October 2016, Mr. Elizabeth sent a letter to Ms. Pool advising her that his client objected to the sale of any shares of the company to third parties without first being given the opportunity to exercise her peremptory rights under the Companies Ordinance 1972. He put her on notice that the sale would be challenged in Court.

[191] A letter dated 20 December 2016 from the Law Chambers of Clifford Andre addressed ‘to whom it may concern’ noted that on 14 December 2016, he received from Drambois the sum of 3.5 cents USD in favour of Ms. Lefevre ‘as full payment of 213,280.00 ordinary shares standing in the name of Natalie Lefevre in the register of [BVP]’. The letter noted that the sum was paid ‘pursuant to offers made by the said company dated 25 July 2016 and 7 October 2016’. The letter indicates that Ms. Lefevre would be informed by way of post to the address of her legal counsel (exhibit R2-4).

Transfer of shares from Concordia to Drambois – Absence of sanction

[192] Ms. Pool noted in her letter of 12 August 2016 to Mr. Elizabeth, that the ‘Company’s directors and beneficial owners are citizens of Seychelles, hence, there is no need to seek sanction’. However, the evidence indicates that the beneficial owners of Drambois are in fact two IBCs. Therefore, it was necessary to get sanction for the purchase under the IPTRA, as Ms. Pool confirmed when she gave evidence. No evidence has been presented to the Court that such sanction was or has since been granted. As already noted above, the Court therefore finds that the acquisition of the shares by Drambois was not valid pursuant to the IPTRA.

Value of the shares

[193] The value of the shares of BVP was an ongoing point of contention in this case.

[194] As noted above, Drambois valued all the shares in BVP as at July 2016 at 1USD, which placed the price per share at a fraction of a cent. However, Drambois provided no evidence as to how they came to this value. The letter from Ms. Pool to Ms. Lefevre on 25 July 2016 says that the price is based:

‘…on the annual returns of the Company for the last five years and independent analysis of the market value of shares of the Company Beau Vallon Properties Limited’.

[195] It became apparent that the ‘independent market valuation’ referred to was a valuation carried out by ACM Auditors. This valuation was not provided to the Court, nor any other information regarding the process adopted by Drambois in arriving at a value of 1USD. Concordia, which accepted the offer – provided no evidence as to how they satisfied themselves that the value represented fair consideration. The testimony of Mr. Zaslonov also did not shed any further light on this matter.

[196] Ms. Lefevre provided a report prepared by Mr. Maurel from Premium Realty dated 12 March 2016 (exhibit P22). Mr. Maurel is a real estate agent. His report estimated the market value of BVP. The total value of the building and surroundings was valued at USD 10,150,000, and the land was valued at USD 5,283,000 (a total of USD 15,433,000). These figures are set against the future income, total debt and cash in hand of the business on the final page of the report to calculate a ‘Business and Land Value Estimate’ of USD 27,844,370. Counsel for Drambois did not cross-examine this witness, and counsel for the other respondents only challenged the expertise of Mr. Maurel. The Court, however, agrees with the respondents that – while the witness may have been well-qualified to provide a value of the land and buildings owned by BVP – he was not similarly well-placed to assess the financial situation of the company. It is also not clear from the report itself what financial information was relied upon. BVP, which initially commissioned the report, did not expressly accept the valuation provided in the report when it was prepared.

[197] A valuation prepared by Mr. Roucou was also provided by Ms. Lefevre. He valued the current market value on 16 May 2018 at SCR 256,100,000, comprising of land valued at SCR58, 000,000, buildings at SCR 189,600,000 and external and other infrastructure at SCR8, 500,000.

[198] In the absence of any clarity regarding the value of the shares, the Court ordered that an independent valuation be undertaken. The report, prepared by Moustache and Associates dated 25 April 2019, values the shares of BVP as at 31 December 2017. The main methods used were: earning capacity method; net asset method; and discounted cash flow method. The report confirms that the authorized capital of the company is SCR 60,000,000 divided into 6,000,000 shares with a par value of SCR 10-/ each. The share capital distribution at December 2017 was: Concordia – 96% and Natalie Lefevre – 4%. This appears to have been rounded up. More accurate figures are 96.4% and 3.6% respectively. The report values BVP’s total assets as at December 2017 to be SCR 300,201,920 and the total equities and liabilities at exactly the same amount, i.e. SCR 300,201,920.

[199] The report values the price per share of BVP to be SCR 14.58. This was subsequently amended in the letter dated 16 May 2019 from Mr. Moustache. This letter notes a further assumption that should have been noted in the report regarding accumulated debts/payables, and the implications of this. He concludes:

“As a way forward we suggest one further option with the treatment of this liability.

The amount of SCR 218,953,798 as at December 2017 be discounted at 5% per year to December 2023, which is SCR 171,556,030-/, (see page 3).

This would yield a share price of SCR22.39 which could then be aggregated with the price obtained in the Net Asset Method of SCR15.38 to arrive at a final recommended share price of SCR18.89.”

[200] On the evidence provided, the Court considers the most reliable assessment as to the value of the shares in BVP is the report provided by Moustache and Associates. This report valued the price per share to be SCR 18.89 as at 31 December 2017. On the basis of that value, the petitioner’s shares were worth SCR4,028,859.20. The Court therefore finds that the consideration offered by Drambois – which was purportedly based on the audited reports (like the Moustache report) – did not represent fair consideration.

[201] The Moustache report is, however, based on the audited financial statements of BVP. A question remains regarding the accuracy of these reports given the finding above regarding the legality of the loans recorded therein. Evidence has been adduced that at least some of these loans are unlawful. In particular, Mr. Zaslonov admitted that BVP received several loans from a company called Zakya. These loans were apparently (though the Court was provided with no documentary evidence) unsecured, in foreign currency, and without personal guarantees. The loans were significant – allegedly around SCR175,000,000 according to Mr. Zaslonov. He admitted that Zakya was an IBC. The company’s auditor, Ms. Gemma Roberts, was unable to throw any further light on these loans, even when pressed by the Court. Despite having been requested, further documentation substantiating the loans was not provided. Section 5 (2) (b) and (c) of the International Business Companies Act 2016 is categorical that a Seychellois IBC may not inter alia own an interest in an immoveable property situated in Seychelles or carry on banking business in or outside Seychelles. In the circumstances, I find that these loans were illegal. This matter is addressed further below in orders.

[202] The Court thus finds that the purported transfer of shares from Concordia to Drambois was not bona fides because (1) BVP and its directors, and Drambois, failed to follow the appropriate procedure under the applicable M & A; (2) Drambois did not have the necessary sanction to purchase the shares of Concordia; and (3) the value provided by Drambois did not represent fair consideration for the shares acquired.

4. Whether Ms. Lefevre was treated oppressively under section 201 of the Companies Ordinance.

[203] Section 201 of the Companies Ordinance provides in relevant form:

“201. (1) Any shareholder of a company who complains that the affairs of the company are being conducted in a manner which is oppressive or unfairly prejudicial to some part of the shareholders (including himself) or, in a case falling within section 190(3), the Registrar, may make an application by way of petition to the court for an order under this section.

(2) If on the hearing of the application the court is satisfied either: -

(b) the persons who are or were in control of the affairs of the company have been guilty of serious misconduct or breaches of duty which has or have prejudicially affected the interests of the applicant, either alone or together with other shareholders; the court may, with a view to bringing to an end or remedying the matters complained of, make such order as it thinks fit, whether for regulating the conduct of the company’s affairs in future, or for the purchase of the shares of any shareholders of the company by other shareholders of the company or for the acquisition of any such shares by the company and, in the case of such an acquisition by the company, for the reduction accordingly of the company’s capital, or otherwise.

(3) Without prejudice to the generality of its powers under the last foregoing subsection, the court may order that: -

(a) an action or other proceeding shall be brought in the company’s name and conducted by any person (including the Registrar) appointed by the court;

(c) any person shall be appointed to be a director or managing director of the company or of its holding company or subsidiary on such terms and condition as the court thinks fit;

(d) a dividend shall be paid by the company to shareholders or any class of shareholders of the company or by a subsidiary of the company to the company;

(e) any person shall pay damages or compensation to the company or to the applicant for any loss suffered in consequence of that person’s misconduct or breach of duty…”

[204] Ms. Lefevre avers that the conduct of Mr. Zaslonov and Mr. Khlebnikov, Directors of BVP were oppressive, unfairly prejudicial and constitute serious misconduct or breaches of duty. Ms. Lefevre further avers that they, together with Drambois, have:

“failed to promote the interests of the company above their own interests, failed to enhance the interests of the shareholders as a whole and in particular [herself]; failed to give any or any sound financial reason for the sale of the company, failed to circulate any proper or any financial details about the sale; failed to justify why the company is only valued at US$ 1 when it holds significant property interests and has a declared annual profit of over US$ 3 million.”

[205] Details of the directors’ misconduct or breaches of duty have been further particularised as a failure to abide by procedural requirements, (termed by Ms. Lefevre to be ‘breaches’ and by Mr. Zaslonov to be ‘omissions’).

[206] In particular, Ms. Lefevre has made an issue of the directors not obtaining the authorisation of a general meeting to increase the share capital of BVP and to dispose of the shares in BVP without due process and contrary to the Ordinance.

[207] It is trite that if one’s share carries a vote but the company refuses to record it, an individual membership right is infringed. In the words of Sir George Jessel M.R in Pender v Lushington (1877) 6 Ch.D. 70, 80 –

“He is a member of the company, and whether he votes with the majority or the minority he is entitled to have his vote recorded – an individual right in respect of which he has a right to sue.”

[208] Ms. Lefevre has also particularised the two director’s failure to hold general annual meetings or to notify her of the same to allow her to attend such as and when convened; not submitting annual returns; not lodging the return of allotment of shares with the Registrar of Companies at all therefore failing to do so within the prescribed time; failing to offer in no ambiguous or uncertain terms the issued or new shares to Ms. Lefevre for subscription in proportion to the nominal value of her shareholding in the company; failing to comply with the procedure of making a rights issue by failing to send an explanatory letter to her accompanied by a provisional allotment letter in respect of the shares to which each member is entitled to apply; failing to attach a form of acceptance and a form of renunciation to enable her to exercise her rights to the shares or renounce her rights to apply for the same; generally withholding information from the shareholders; unlawfully changing the Articles of Association of BVP; unlawfully diluting her shares; giving fictitious loans from BVP to their sister company, namely Savoy Development Limited, in which they also held directorship position in direct or indirect, immediate or prospective conflict of interest without disclosing their respective interests to the meeting of directors.

[209] Some of these issues have already been addressed. However, in general the Court finds that the actions of the directors were in breach of multiple provisions of the Ordinance.

[210] Specifically, section 119 of the Ordinance makes provision for the yearly general meetings to be conducted by the company. Mr. Zaslonov gave evidence of only one meeting where notice was sent to Ms. Lefevre via mail and email. This was an extraordinary meeting, which was held in August 2015 (exhibit R 1 (13)).

[211] With respect to the submission of annual returns, section 114 of the Ordinance makes provision for a company’s duty to submit their annual returns to the Registrar. Section 114 (3) provides for penalty fines to be incurred for non-compliance with this requirement. Mr. Zaslonov admitted in cross-examination to preparing annual returns, but not filing them. The tax returns for 30 December 2012, 2013, 2014 and 2015 were filed on 30 December 2016. The tax return for the year ending 2016 was filed on 28 November 2017. The 2017 tax return has not yet been filed.

[212] With regard to the offer of new shares, under section 173(1) of the Ordinance, the directors were bound to offer, in no ambiguous or uncertain terms, the new shares for subscription to the existing shareholders, including Ms. Lefevre. Mr. Zaslonov admitted in evidence that notice was not given by BVP or any of its Directors to Ms. Lefevre to advise her of Drambois’ offer to purchase shares in BVP, citing it as an ‘omission’. However, he believed that Drambois had already informed Ms. Lefevre of the same. Mr. Zaslonov also admitted to not circulating the ACM report to all shareholders.

[213] Section 20 of the Ordinance requires that an alteration the memorandum of association be made by special resolution. Mr. Zaslonov gave evidence that an extraordinary meeting, to which Ms. Lefevre was invited, was held in August 2015 (exhibit R 1 (13)), with the object of changing the whole body of the M & A of the company “because [they] became absolutely obsolete”. He explained that the old memorandum (exhibit P24) reflected the company’s former business of planting, irrigation and cultivation, which were no longer the objects of BVP, but otherwise there was no alteration that would cause a disadvantage to any of the shareholders. The Court finds that Ms. Lefevre was notified of the 2015 extraordinary meeting and provided with the proposed amendments to the M & A. Mr. Zaslonov gave further evidence that a draft M & A which was approved by resolution of members were sent to Ms. Lefevre by way of notice (exhibit R 1 (14)) – though this is denied by her.

[214] It is also trite that it is the duty of a director of a company to avoid a conflict of interest and this is strictly applied. The duty is breached whether or not the directors had fraudulent motives. There will be a breach of this duty where the director has put his or her own interests ahead of the interests of the company.

[215] Section 171 (g) of the Ordinance provides –

“If directors have any interest, whether direct or indirect, immediate or prospective, in any contract or transaction or proposed contract or transaction with the company, to disclose each of their respective interests to the meeting of the directors.”

[216] Directors who put themselves in a conflict of interest situation which could amount to a breach of their fiduciary or statutory duty to avoid liability for the breach, must disclose the details of their personal interest and obtain the company’s fully informed consent.

[217] In Orangines (Pty) Ltd v St Louis Hillside (Pty) Ltd [1996] SLR 185, the Court refused to entertain a sale of land by a director acting for a company to another company in which he was also acting as a director. The Court held that although the director of a proprietary company had the power to sell the assets of the company under section 34 (2), he was also acting in breach of his fiduciary duties to the vendor company by purchasing the parcel through a company of which he was the beneficial owner.

[218] Several issues were raised in relation to loans given and taken by BVP. In regards to loans given, Mr. Zaslonov admitted in evidence that BVP paid the car park construction bill of Savoy Development. He also admitted that he is a Director of Savoy, but denied that he had any interest in Savoy. BVP also gave a loan to Eastern European Engineering, which Mr. Zaslonov is also a Director of – though he claimed not to be a shareholder. He is unsure if Mr. Khlebnikov has shares in that company. He stated that Concordia approved these loans through its proxy at the meetings held each year, and denied that Ms. Lefevre made any queries concerning the accounts of BVP. As noted above, annual returns were consistently filed late, so Ms. Lefevre would not have had access.

[219] In relation to loans taken, specifically large loans allegedly from the IBC Zakya, this is addressed both in the court’s considerations above and in its orders below.

[220] In respect to Mr. Zaslonov and Mr. Khlebnikov transferring shares in BVP to Concordia, a non-Seychellois corporate entity, without prior sanction to purchase the new issued shares contrary to law it is noted that directors are under a fiduciary duty to act in good faith and in the best interests of the company.

[221] Section 171 (1) (c) of the Ordinance provides that:

“it shall be the duty of the directors of a company to exercise their powers in good faith in what they reasonably consider to be the interests of the shareholders of the company as a whole and for the respective purposes for which such powers are explicitly or impliedly conferred.”

In this respect, directors are presumed to do so unless proven otherwise.

[222] Section 171 (2) (a) of the same further provides that the:

“duties imposed by this section shall be owed to the company, and not to the members, shareholders, debenture holders or creditors of the company, but an application may be made to the court by any shareholder or debenture holder for a declaration that any act or transaction, or proposed act or transaction, by the directors or any director or former director involves a breach of any of their said duties, and if the court makes such a declaration it may issue an injunction to restrain the directors or any director or former director from doing any such proposed act or entering into any such proposed transaction.”

[223] The good faith aspect of both the fiduciary and statutory duties requires directors to genuinely believe that they are acting in the best interests of the company; directors will not comply with their duty merely because they assert that they have an honest belief that their actions are in the best interests of the company. In Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) [2008] WASC 239, Owen J stated that while it is not the court’s role to second-guess directors about management decisions, directors will breach their duty

“if, on consideration of the surrounding circumstances (objectively viewed), the assertion of directors that their conduct was bona fide in the interests of the company and for proper purposes should be doubted, discounted or not accepted.”

[224] The duty is breached if a director acts in a manner that no rational director would have considered to be in the best interests of the company (ASIC v Adler [2002] NSWSC 171). Bowen LJ explained the reason for this in Hutton v West Cork Railway Co (1883) 23 Ch D 654 –

“Bona fides (good faith) cannot be the sole test, otherwise you might have a lunatic conducting the affairs of the company, and paying its money with both hands in a manner perfectly bona fide yet perfectly irrational”.

[225] The duty to act in good faith in the best interests of the company means that directors must act in the best interests of the shareholders as a collective group. Evershed MR, in Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286, stated –

“[T]he phrase, ‘the company as a whole’, does not (at any rate in such a case as the present) mean the company as a commercial entity distinct from the corporators: it means the corporators as a general body”.

[226] The directors’ duty to act in good faith and in the best interests of the shareholders does not mean that they owe duties to particular shareholders. In some special circumstances, a director may owe fiduciary duties to an individual shareholder. For such circumstances to arise, the director must have been in direct and close contact with the individual member so that the director caused the member to act in a certain way which turned out to be detrimental to them (Peskin v Anderson [2001] 19 ACLC 3001).

[227] Directors must exercise their power in the interests of their company, but in so doing they may also promote their own interests as shareholders to the detriment of other shareholders. In such cases, the courts will not intervene unless it is established that their motivating purpose was improper, even if they are also motivated by some subsidiary proper purpose.

[228] Issuing shares for an improper purpose may constitute oppressive or unfair conduct and enable a shareholder to obtain a remedy under section 201 of the Companies Act, which allows minorities within a company to take action to protect them against oppressive majority decisions.

[229] ‘Oppressive’ conduct in this context has been interpreted to mean that the company has exercised its authority “in a manner burdensome, harsh and wrongful” (Re Westbourne Galleries Ltd [1970] 1 W.L.R.1390). It has to go beyond what is required to make out a case for a winding-up order and has to indicate some lack of probity or fair dealing towards one or more members of the company (Re Lundie Brothers Ltd [1965] 1 W.L.R. 1051, 1058).

[230] Isolated acts of oppression are not normally sufficient to justify relief under the section: the words used in the section, ‘the affairs of the company are conducted in a manner oppressive’ suggests prima facie a continuing process (Re H. R. Harmer Ltd [1959] 1 W.L.R 62).

[231] An act of omission might amount to oppressive conduct if it was shown that it had been designed to achieve some unfair advantage over those claiming to be oppressed (Re Five Minute Car Wash Service Ltd [1966] 1 W.L.R. 745, 752). Allegations of unwise, inefficient and careless conduct against a director in the performance of his duties could not in themselves give rise to any claim for relief under the section, and a petition limited to such allegations would be dismissed in limine (Re Five Minute Car Wash Service Ltd).

[232] The court has adopted a circumstance-based approach to assessing whether there has been oppressive conduct. For instance, in several cases the court has considered the directors’ powers to issue shares to be oppressive, and it has been held that “directors are not entitled to use their power of issuing shares merely for the purpose of maintaining their control or the control of themselves and their friends over the affairs of the company, or merely for the purpose of defeating the wishes of the existing majority of shareholders” (Piercy v S. Mills & Co Ltd [1920] 1 Ch. 77, 84).

[233] In Hogg v Cramphorn [1967] Ch. 254, 266-268, in the face of an unwelcome take-over bid, the directors issued 5,707 preference shares to a trust newly established for the benefit of the company’s employees, the trustees being provided by the company with an interest-free loan in order to be able to subscribe to the shares. The votes attached to the shares coupled with those of the directors and their friends were sufficient to constitute a majority of the general meeting, and the bid was defeated. A shareholder of the company challenged the validity of the allotment. The Court, in holding that the directors had acted for an improper purpose made it clear that the requirement to act for a proper purpose was distinct from the requirement that directors act bona fide.

[234] In Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285, the High Court explained that where there was more than one purpose for a share issue, the ‘but for’ test should be applied to work out whether the directors breached their duty and issued the shares for an improper purpose. An allotment of shares will be invalidated if the impermissible purpose is causative in the sense that, but for its presence, no allotment would have been made. The Court held –

“As a matter of logic and principle, the preferable view would seem to be that, regardless of whether the impermissible purpose was the dominant one or but one of a number of significantly contributing causes, the allotment will be invalidated if the impermissible purpose was causative in the sense that, but for its presence, ‘the power would not have been exercised’ [Mills v Mills (1938) 60 CLR 150 at 186 per Dixon J]”.

[235] In Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821, the Privy Council held that directors may act for improper purposes even where a share issue is not motivated by self-interest. Directors breach their duty to act for proper purposes if they use their power to issue shares for the purpose of creating a new majority shareholder or to manipulate control within the company. This is so even where the directors may honestly believe their actions are in the best overall interests of the shareholders.

[236] A resolution constitutes a fraud on the minority if it is not passed bona fide for the benefit of the company as a whole (Lindley M.R. in Allen v Gold Reefs of West Africa [1900]1 Ch. 656, 671), or its effect is “to discriminate between the majority shareholders and the minority shareholders so as to give the former an advantage of which the latter was deprived” (Evershed M.R. in Greenhalgh v Arderne Cinemas Ltd [1950] 2 All E.R. 1120, 1126).

[237] Mr. Zaslonov gave the following evidence during the hearing to show that any omissions or breaches on the directors’ part were deliberate and motivated ultimately by an improper purpose –

“Q: Alright, and those annual returns were not disclosed?

A: To whom not disclosed? It was disclosed to Concordia, it is only known shareholders because of this pending cases from the year 2009. The 2nd shareholders were not established and under advice of Mr Pesi Pardiwalla, who was our counsel at the time. So we were not recognising Ms Lefevre as the 2nd shareholder. So it was not given to her.”

Further, when asked whether he would be amenable to the shares being sold to Ms. Lefevre for 96 cents, Mr. Zaslonov replied,

“well, Ms. Lefevre is known to us and definitely not as a person who we entrust the company. Ms. Lefevre has only approached the Directors and Hotel only for purpose to snatch some few millions. And just negotiate some millions to give to her, she never took part in affairs of the Hotel, never interested, never even step on premises …” and further added, “No, I do not think she deserved it.”

[238] In their closing submissions the Respondents have claimed that the remedy under section 201 by Ms. Lefevre is not maintainable against Mr. Zaslonov and Mr. Khlebnikov for acts performed by previous directors and shareholders. That much is accepted by the Court. However, in terms of their actions relating to loans taken and transfers of shares as detailed in this judgement, the remedy is maintainable. Since they became directors they are accountable to the company and the shareholders.

[239] The Court therefore finds that the actions of the directors of BVP, namely Mr. Zaslonov and Mr. Khlebnikov as detailed above were oppressive, unfairly prejudicial to Ms. Lefevre and constitute serious misconduct or breaches of duty which were detrimental to BVP as a whole.

Alleged offer to buy Ms. Lefevre’s shares

[240] A final note is made about the alleged offer to buy Ms. Lefevre’s shares for the sake of completeness. Ms. Lefevre averred that she had an agreement with (some of) the respondents for the purchase of her shares. She discussed the sale of her shares with Mr. Eduard Gevorkyan. However, it is not clear who Mr. Gevorkyan was representing at the time: his email address from the initial correspondence indicates that he is part of the Guta Group, but thereafter he appears to have used a personal email address. Ms. Lefevre also met with Mr. Zaslonov to discuss the sale of her shares. Finally, she also gave evidence that she met with one of the owners of the Guta Group to discuss this offer. This evidence was not challenged by the respondents.

[241] The email correspondence indicates that there were discussions between Ms. Lefevre and representatives of BVP and/or the Guta Group and/or Concordia regarding the sale of her shares. There is no indication, however, that any price was agreed. The email from Mr. Gevorkyan to Ms. Lefevre on 25 February 2013 – which was prior to the Court of Appeal judgment confirming the validity of her shareholding – asked if she could ‘please send the signed letter as we discussed last time together with your proposals as an ‘agreement’ asap’. The next email provided by Ms. Lefevre on the subject is almost two years later in January 2015 when she sent an email to Mr. Gevorkyan and Mr. Denis Savoy. She also referred to an offer in an email sent to Mr. Zaslonov and Mr. Khlebnikov and copied to Denis Savoy, Pesi Pardiwalla, Eduard Gevorkyan and ‘Denis V’ (Executive, Coral Strand) dated 30 July 2015. However, none of these emails include an agreement as to price for her shares. Nor do the emails clarify what entities would be party to such an agreement.

[242] The Court therefore finds that there was no valid agreement between Ms. Lefevre and Concordia or other associated entity for the purchase of her shares.

The Registrar of Companies (6th Respondent)

[243] An action against the 6th Respondent can only be maintained if there is an allegation of fraud in terms of section 39 (3) of the Companies Act (S. Palani Batcha vs Christopher Gopal & Anor (Civil Side No. 16 of 2011) [2011] SCSC 96 (01 December 2011)). There has been no such allegation and the action against the Registrar is hereby dismissed.

Relief

[244] Ms. Lefevre has narrowed down just over four pages’ worth of prayers for relief in her amended petition to five paragraphs in her closing submissions (ref para [101] of Ms. Ms. Lefevre’s closing submissions, wherein it is stated, ‘In respect of the relief sought, Ms. Lefevre submits that the Court can [inter alia] make the following Orders [set out, where relevant, in order of preference of Ms. Lefevre]’). These prayers for relief are reproduced again below:

(1) That the agreement and purported transaction between the 2nd and 3rd Respondents be declared unlawful and void and any steps taken in relation to cementing that agreement be declared void and set aside.

(2) That the 3rd Respondent be ordered to sell its shares to the Petitioner on the same terms and conditions it has stated it was to sell to the 2nd Respondent.

(3) Alternatively, that the Court declares that Field did not have sanction to purchase the additional 5, 390, 000 shares in the 1st Respondent and these shares remain unallotted. The Register of Shares should be rectified to reflect this and the Petitioner and the 3rd Respondent are entitled to purchase the unallotted shares in the 1st Respondent in 35% / 65% pro-rata proportions accordingly, and at the original nominal value of those shares in November 2005.

(4) Alternatively, the Court orders the 3rd Respondent to purchase the Petitioner’s shares on the basis of its original agreement with Accredo/HJL in 2007; that is that it pays the equivalent of 18.5% of the total value of the company for the Petitioner’s shares, such value to be determined by an independent valuation and subject to any provisos, conditions, qualifications or other issues highlighted by the independent auditors.

(5) That the 1st Respondent and its Directors be investigated by the Inspector of Taxes, the Company Registrar [and the relevant Financial Reporting Authority] in relation to its dealings and liabilities incurred towards the various IBCs and other entities and the source of such loans and destination of such repayments.

[245] She had also prayed for an order for damages jointly and severally against Drambois, Concordia, Mr. Zaslonov and Mr. Khlebnikov in the sum of SCR 1,000,000 for inconvenience, distress, anxiety, mental anguish and trauma.

[246] The Court, where requested to intervene under section 201, is given very wide powers. The operation of section 201 is not limited to winding up remedies and instead the Court is possessed with wide discretion and powers under section 201(2) of the Act (see Pennington's Company Law, 5th Edition, Chapter 17, p 743; Minority Shareholder's Rights, Sweet & Maxwell 1990 Edition, R. Hollington, p45).

[247] The Petition also included the following prayer for relief –

“For an order that any person found to have acted contrary to law with regard to the conduct of the affairs of BVP be dealt with as the law prescribes.”

[248] In circumstances such as the present, fashioning a fit and proper remedy is an evidence-dependent exercise. I note that there was no evidence to show that either Mr. Zaslonov and Mr. Khlebnikov benefited personally from their actions or those of BVP. However, they still acted to the detriment of the company and at least one of the shareholders. The fact that both Mr. Zaslonov and Mr, Khlebnikov are also directors or officers of other companies related or associated with Beau Vallon Properties such as Savoy and EEL and which have benefited from the matters complained of in this suit is also noted.

Orders

[249] Section 201 (3) (e) of the Ordinance in particular provides that the Court may order that any person shall pay damages or compensation to the applicant for any loss suffered in consequence of that person’s misconduct or breach of duty.

[250] The Court had hoped to be in a position to make an order regarding the value of the shares in BVP. Unfortunately, due in large part to the reluctance of the respondents to provide the Court with the necessary evidence, the Court is not in a position to do so. The Moustache report values the shares at SCR 18.89 as at 31 December 2017. On the basis of that value, Ms. Lefevre’s shares were worth SCR 4,028,859.20. However, the Court has made a finding that at least some of the loans taken by BVP were illegal. Mr. Moustache testified that, if the liabilities as identified in the audited reports were not enforceable or proper, the figures in his report would be different as in certain instances those liabilities would not need to be taken into account. The Court cannot therefore rely on the value in the Moustache report.

[251] Ms. Roberts, the auditor of BVP testified that she had satisfied herself that the liabilities included in BVP’s audited financial statements were not materially misstated. Section 158(7) of the Ordinance, read with section 153(5), imposes on auditors a duty to include in their report on a company’s accounts a statement or correction of a director’s annual report which may be false, deceptive, misleading or incomplete. The Court has made a finding that at least some of the loans made to BVP are illegal. The Court is not however clear as regards the precise nature of those loans, including the precise value of the loans. The Court is also concerned that some of these loans may be fictitious. Accordingly, this Court orders Ms. Gemma Roberts to provide the documentation in support of BVP’s liabilities contained in her reports since 2009. This documentation should be provided to this Court no later than two weeks after delivery of this decision. Further orders of the Court will issue on the basis of the documentation provided.

[252] I also declare that the purported share transfers from both Concordia and Ms. Lefevre to the second respondent, Drambois, are null and void.

[253] In regards to monetary relief for Ms. Lefevre and costs, the Court reserves its decision.

[254] In regards to remedies relating to the actions of Mr. Zaslonov and Mr. Khlebnikov, the Court also reserves its decision.

[255] In the interim, I prohibit any disposal of or dealing with shares of BVP, and any disposal of or dealing with assets of BVP that would affect the share value in BVP.

[256] The case against the Registrar of Companies is dismissed.

Signed, dated and delivered at Ile du Port on 15 October 2019.

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Twomey CJ