RZ3262019 Limited (Appellant) v Happy Lion Ventures Ltd and another (Respondents) (Virgin Islands)

Case summary

Case ID

JCPC/2025/0042

Jurisdiction

British Virgin Islands

Parties

Appellant(s)

RZ3262019 Limited

Respondent(s)

Happy Lion Ventures ltd and Chinex Limited

Issue

The operation of the doctrine of common mistake in the context of a sale of shares in an asset-owning company, where the mistake relates to the underlying assets.

Facts

This is an appeal about the contract law doctrine of common mistake. There are two contracts. The first is a share purchase agreement dated 9 May 2019 (the “SPA”), under which the Appellant acquired, from the Respondents, shares in two further companies. The effect of acquiring these shares was to give the Appellant indirect ownership of a Chinese company engaged in a property development project. The second contract is a vendor loan agreement dated 23 July 2020 (the “VLA”) under which the Respondents provided finance to the Appellant to fund its purchase under the SPA. The Appellant and Respondent companies are all incorporated in the British Virgin Islands, but the two contracts are governed by Hong Kong law. The dispute has arisen from the Respondents’ attempt to have liquidators appointed over the Appellant, on the grounds that the Appellant has defaulted on the VLA. The Appellant resisted the Respondent’s attempt to have liquidators appointed, on the basis that the VLA was a genuinely disputed debt. It was genuinely disputed, the Appellant argued, because the contracts were in fact void (under the doctrine of common mistake) because, contrary to the shared assumptions of the parties, the project company had been engaged in ‘land hoarding’/‘property hoarding’ such that it was exposed to serious penalties under Chinese law. The High Court of the Eastern Caribbean Supreme Court rejected this argument: even if what the Appellant said was true, it was irrelevant to subject matter of the contractual arrangement, which was concerned with the transfer of the shares in the companies that owned the project company. The Court of Appeal upheld that conclusion. The Appellant now appeals to the Privy Council on the basis of assumed facts (assuming that the project company had been engaged in ‘land hoarding’/‘property hoarding’ and that there was a common mistaken assumption about this at the time the contracts were entered into.)

Date of issue

16 May 2025

Case origin

PTA

Appeal

Justices

Lord Hodge

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