Hague v. Nam Tai Electronics Inc & Ors, Court of Appeal - Privy Council, November 20, 2006, [2006] UKPC 52

Resolution Date:November 20, 2006
Issuing Organization:Privy Council
Actores:Hague v. Nam Tai Electronics Inc & Ors
 
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8[2006]UKPC 52Hague v. Nam Tai Electronics Inc & Ors (British Virgin Islands ) [2006] UKPC 52 (20 November 2006)Privy Council Appeal No 16 of 2005David Hague Appellantv.(1) Nam Tai Electronics Inc(2) Tele Art Inc (In liquidation)(3) Bank of China (Hong Kong) Limited RespondentsFROMTHE COURT OF APPEAL OF BRITISH VIRGIN ISLANDS- - - - - - - - - - - - - - - - - JUDGMENT OF THE LORDS OF THE JUDICIAL COMMITTEE OF THE PRIVY COUNCILDelivered the 20th November 2006- - - - - - - - - - - - - - - - - Present at the hearing:- Lord Bingham of Cornhill Lord Hoffmann Lord Rodger of Earlsferry Lord Walker of Gestingthorpe Lord Mance - - - - - - - - - - - - - - - -[Delivered by Lord Hoffmann]The chief point in this appeal concerns the construction of a provision in the articles of association of Nam Tai Electronics Inc (``Nam Tai''), a company incorporated in the British Virgin Islands, listed on the New York Stock Exchange and carrying on business in China. Mr Robert Yuen, a resident of Hong Kong, and Tele-Art Inc (``TAI''), a BVI company with which he was associated, were respectively the registered owners of 122,727 and 700,908 shares in Nam Tai. On 10 November 1993, by two separate deeds, each charged their shares to the Bank of China (``the Bank'') in support of a guarantee of the repayment of advances by the Bank to Tele-Art Limited (``TAL''), a Hong Kong subsidiary of TAI. TAI seems to have been in some financial difficulties at the time when it charged its shares to secure TAL's indebtedness, because on the very same day as the charges were executed an Irish government agency obtained a judgment against TAI in the BVI High Court for US$799,079. In 1996 TAL defaulted on its payments to the Bank and on 5 August 1996 the Bank called TAI on its guarantee.Events then took an unusual turn. Nam Tai took an assignment of the judgment debt, which had become vested in Forfás, another Irish government agency, and on 27 June 1997 presented a petition to the BVI Court to wind-up TAI on the grounds of insolvency. On 17 July 1998 the court made a winding up order. The appellant Mr David Hague was appointed liquidator. The position was therefore that both the Bank and Nam Tai were creditors of TAI, the Bank holding security over its shares in Nam Tai and Nam Tai itself being unsecured.Nam Tai then devised a scheme to destroy the Bank's security. On 16 October it altered its articles of association to create a special power to redeem the shares of judgment debtors. The International Business Companies Ordinance 1984, under which Nam Tai is registered, provides in section 9 that ``subject to any limitations or provisions to the contrary in...this Act'' a company may ``purchase, redeem or otherwise acquire and hold its own shares''. There is a limitation on this power in section 33(1A), which provides that a company may not redeem its own shares ``without the consent of the member whose shares are to be...redeemed'' unless the company is permitted by its articles to do so ``without that consent''. Regulation 13 of Nam Tai's articles, as it stood before amendment, provided in general terms that, subject to the provisions of the Act, any shares might be redeemed ``on such terms and in such manner as the directors may determine''. But it said nothing which could be construed as permitting redemption without the consent of the member. The directors of Nam Tai resolved to add such a power as regulation 13.1. Paragraph (a) of this new regulation contains definitions and the substantive power is contained in paragraph (b):``Without limiting the generality of Regulation 13 of these Articles, in the furtherance thereof and in addition to any other rights or remedies available to the Company at law or in equity, the Company may at any time and from time to time redeem, at the Redemption Price per share, all or any of its outstanding shares beneficially owned by any Person or registered in the name of any Person whose...

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