BVI Court rejects €7.5m unfair prejudice claim following trial

04/12/23

The Eastern Caribbean Supreme Court, Commercial Division (Wallbank J) has handed down judgment following a three-week trial in November 2022, dismissing a claim by Amstel Investment Holdings Ltd and Christopher McKenzie (the “McKenzie Parties”) under s.184I of the BVI Business Companies Act in respect of allegedly unfairly prejudicial conduct in the management of AMS Holdings Ltd (the “Company”) by Sukru Evrengun and Circle Capital Ltd (collectively, the “Evrengun Parties”). Ben Woolgar appeared unled for the Evrengun Parties at trial.

The Company was a holding vehicle for a group providing corporate, insurance and legal services [26]. Following a buy-out of another minority shareholder in July 2014, Circle Capital held 70% of the shares in the Company, and Amstel held 30% [43(3)]. Mr Evrengun and Mr McKenzie’s relationship broke down in late 2017 [159].

There were two main factual issues at trial, namely (i) whether debts owed by the Company to two entities, Corepoint and Circle, were legitimate and/or had been disclosed to Mr McKenzie around the time they were incurred, and (ii) whether a debt-for-equity-swap which diluted Amstel’s share of the Company to 5.6% had been legitimate.

Following cross-examination over three days, the Judge found that Mr McKenzie was not a witness on whom the Court could rely [330]. The Judge drew particular attention to a “cross-examination trap” which Mr McKenzie fell into [224], concerning whether a Statutory Demand for US$488,637.53 Mr McKenzie had served on the Company had been served honestly – in fact, that figure was substantially too high [241]. As the Judge recorded at [242]:

This line of cross-examination was what Mr. Woolgar had opened his cross-examination of Mr. McKenzie with.  It was an expertly and carefully laid path of propositions, which (in line with classic text-book cross-examination methodology) Mr. Woolgar knew and intended Mr. McKenzie would have no difficulty answering confidently.  Mr. McKenzie splendidly and unwittingly complied, only realising the pit he had been led to fall into when he found himself, tongue-tied, at the bottom of it. 

The Judge held that (i) there was no evidence that the Corepoint and Circle Debts were anything other than legitimate [347], and (ii) following Ben’s cross-examination, it was established that they had not in any event been hidden from Mr McKenzie, and that he had been fully aware of the net debt of the Company at all times [136]-[137], [350]-[352]. He also rejected the case in relation to the debt-for-equity swap, rejecting the argument that the Eastern Caribbean Court of Appeal’s decision in Independent Asset Management Company v Swiss Forfaiting [2017] ECSCJ No.271 dictated a contrary conclusion [369]-[378]. The Judge also held that a draft Shareholders’ Agreement on which the McKenzie Parties relied had not been agreed [420], and could not be relied upon by way of estoppel by convention [429]-[434].

As a result of the dismissal of the unfair prejudice claim, the Company’s claim for a declaration that a Notice of Redemption of Amstel’s shares was valid succeeded.

The judgment can be viewed here.