Archer and another (Appellants) v Fabian Investments Limited and others (Respondents) (Bahamas)
Case ID: JCPC 2014/0044
Jurisdiction: The Court of Appeal of the Commonwealth of the Bahamas
In the context of a dispute over the legal and beneficial entitlement to shares in a Bahamas company, the issues included whether:
- the Court of Appeal findings against the Appellants were wrong, where no defence or contradictory evidence was filed at first instance;
- the Court of Appeal’s approach to the evidence was wrong, including where it allowed submissions from the fourth Respondent without considering his failure to file a Defence or appear at first instance;
- the Court of Appeal wrongly departed from the precedent of a previous Court of Appeal decision.
The appeal arises out of a claim brought by certain individuals and a Bahamas company Petroleum Products Limited ("Petroleum") that the individual plaintiffs were the beneficial owners of its shares. The defendants consisted of the respondents to this appeal, and other parties including Gulf Union Bank ("Gulf"). The individual plaintiffs purchased Petroleum’s shares with a loan from the Canadian Imperial Bank of Commerce ("CIBC"), which required as security the hypothecation of the shares. CIBC was later repaid, through new financing obtained from Gulf Union Bank ("Gulf") in the form of a mortgage and debenture (with a personal guarantee as security). In error, CIBC delivered the Petroleum shares to one of the respondents, Mr Maynard. The plaintiffs’ repayments to Gulf fell into arrears, and a rescheduling agreement and personal guarantee were entered into. The individual plaintiffs agreed to assign their Petroleum share certificates to Gulf in support of the guarantee. After default under the rescheduling agreement, Gulf appointed Mr Maynard as receiver of Petroleum per the terms of the debenture. Gulf later sold the Petroleum shares to one of the Respondents, Fabian Investments Ltd.
The Bahamas Supreme Court found that the individual plaintiffs were the legal owners of the shares, but held them on behalf of Fabian. Although the share certificates had never come into Gulf’s possession, Gulf was entitled to specific performance of the share certificate assignment contract, so that on the date of the rescheduling agreement a beneficial interest passed to Gulf and Mr Maynard held the shares to Gulf’s order. Gulf had the right to sell the shares to Fabian under an implied power of sale upon the plaintiffs’ default, but the necessary steps had not been taken to register Fabian as shareholder. The Bahamas Court of Appeal found that Fabian held both the legal and the beneficial title to the shares. Once the plaintiffs had defaulted on the rescheduling agreement, beneficial ownership vested in Gulf. Upon the conclusion of the sale of the shares from Gulf to Fabian, Fabian became the legal and beneficial owner of the shares.
Oswald Michael Archer and another
Fabian Investments Limited and others
Lord Mance, Lord Kerr, Lord Sumption, Lord Reed, Lord Hughes
Hearing start date
22 Feb 2017
Hearing finish date
22 Feb 2017