Bingemann et Al v De Joria et Al

• Jurisdiction: Anguilla
• Judge: George-Creque, J.
• Judgment Date: 11 January 2005
• Neutral Citation: AI 2005 HC 1
• Docket Number: AXAHCV 0011 of 2004
• Court: High Court (Saint Christopher, Nevis And Anguilla)
• Date: 11 January 2005

High Court

George-Creque, J.

AXAHCV 0011 of 2004

Bingemann et al

and

De Joria et al

Appearances:

Mr. James Corbett, QC, Mark Brantley and J. Alex Richardson for the claimants.

Ms. Joyce Kentish, Josephine Gumbs Connor and Navine Fleming Kisob for the defendants.

Company law - Unanimous shareholders' agreement — Construction of agreement — Deceased and first defendant conducting business and causing various companies to be formed — Parties executing shareholders' agreement — Executors of deceased estate bringing action for construction of agreement — Whether agreement enforceable — Whether deceased and first defendant specifically contracting with each other able to bind companies not parties to agreement — Whether disregard of corporate boundaries and formalities invalidating agreement as matter of public policy — Common intention — Estoppel — Civil Procedure Rules, 2000, Part 67.4 — Giving of directions pursuant to rules — Finding that agreement suffering from fundamental flaws as matter of law and therefore incapable of performance — Agreement invalid and unenforceable.

George-Creque, J.

1 This action, commenced by Fixed Date Claim Form, concerns the construction of a document called Unanimous Shareholders’ Agreement dated 13th July, 1996 executed by Martin Crowley, (‘Crowley’) now deceased, and John Paul Jones De Joria (“De Joria”). The Unanimous Shareholders’ Agreement is hereafter called ‘The Agreement’. The Agreement by its terms, is stated as being governed by the laws of Anguilla. The 1st and 2nd claimants are the Executors of the Estate of Crowley and trustees of the Windsong Trust established under a declaration of Trust dated August 17rh 2001. The Windsong Trust is the sole residuary beneficiary under Crowley's will. The 3rd claimant (“Pendragon”) who was later joined by order of the Court is an Anguillian company wholly owned by Crowley. The 1st defendant, De Joria was a business partner of Crowley. The 2nd defendant (“Island”), also joined by order of the Court, is owned principally by De Joria. Pendragon and Island each own an equal 50% interest in Caribbean Distillers Corporation Limited (“CDC”), also an Anguillian company.

2 The claimants seek the determination of certain questions and the giving of certain directions pursuant to Part 67.4 of the Civil Procedure Rules, 2000 (“ CPR 2000”) which in the main are as follows:

• (1) (i) Is the purported Unanimous Shareholders' Agreement dated 13th July, 1996 and entered into as between Crowley on the one hand and De Joria on the other hand (the Agreement”) valid and enforceable as a matter of Anguillian law?

• (ii) As a matter of Anguillian law, could Crowley and De Joria specifically contracting with each other as individuals contractually bind companies and impose contractual obligations upon companies which were not parties to the Agreement and in which Crowley and De Joria held no direct interest?

• (iii) As a matter of Anguillian law does the complete disregard of corporate boundaries and corporate formalities invalidate the Agreement or make it otherwise unenforceable as a matter of public policy?

• (2) (i) If the Court finds that the Agreement is valid and enforceable as a matter of Anguillian law, is it valid and enforceable as against or in relation to Caribbean Distillers Corporation Limited (“CDC”)?

• (ii) If the Court finds that the Agreement is valid and enforceable as a matter of Anguillian law what is the appropriate methodology to be employed as to valuation so as to ensure mutual benefit to the parties thereto as contemplated by the Agreement?

• (3) A direction that the claimants be indemnified out of the assets of the Estate of Crowley, Deceased held by them as Executors in respect of the costs and expenses of and occasioned by this claim.

FACTUAL BACKGROUND AND CHRONOLOGY

3 The factual background and chronology may be distilled as follows:

• (a) Crowley and De Joria, conducted certain business interests together in Anguilla and caused various companies to be incorporated in Anguilla for this and other purposes. On 13th July, 1996, Crowley and De Joria, as individuals, executed the Agreement. The Agreement was drafted by Justice Ian D. Mitchell QC, then a lawyer practicing in Anguilla who later ascended to the bench as a judge of the high Court and is now retired. He said in his witness statement that the Agreement was prepared on the joint instructions of Crowley and De Joria, and that it took several months and several revisions before Crowley and De Joria and their US counsel were happy with the draft and ready to sign it.

• (b) Recital A of the Agreement stated as follows:

• “The Shareholders are currently the sole legal and beneficial owners of all the issued and outstanding shares of the Anguillian Corporations listed in Schedule A hereto and as signed by the shareholders and as amended from time to time.” Schedule A of the Agreement listed the following entities:

  • (1) St. Maarten Spirits Limited (“SMS”) — “held as to 50% by Crowley through his wholly owned and controlled Anguillian company Pendragon International Limited, and as to the other 50% by De Joria through his wholly owned and controlled Anguillian company The Island Company Limited”

  • (2) Anguilla Rums Limited — “held as to 50% by De Joria and as to the other 50% by Crowley”

  • (3) Sea Grape Beach Club Limited — “held as to 50% by Crowley through the said Pendragon International Limited and as to the other 50% by De Joria through the said Island Company Limited” SMS, Anguilla Rums Limited (“Anguilla Rums”) and Sea Grape Beach Club Limited will hereafter together be referred as “The Schedule A Corporations”.

• (c) SMS and CDC were incorporated in Anguilla on 9th September, 1993. Anguilla Rums was incorporated in Anguilla on 7th July, 1994. There were two Sea Grape Companies and there is some confusion as to which of them was intended to be listed in Schedule A. Suffice it to say however, that whichever of them it referred to, is not relevant for the purposes of these proceedings since one was struck off the register of companies on 19'h January 2000 and the other disposed of by sale and the proceeds dealt with between the parties and thus not in issue. Pendragon and Island were incorporated sometime prior to the Agreement.

• (d) CDC's main business is the manufacture and distribution of the Patron brand of ultra premium tequila and to all intents and purposes is a highly successful operation. The shares of CDC held by Pendragon represent the bulk of the value of Crowley's Estate.

• (e) SMS merged with and into CDC on or about March 22nd 2002 pursuant to an agreement and plan of merger dated 11th March 2002, and SMS was subsequently struck from the Register of companies.

• (f) Crowley died in Anguilla on April, 19th 2003. Letters Testamentary and Letters of Administration were issued by the Courts of California and Anguilla respectively, on 20th June 2003 and November 4th 2003.

• (g) Prior to Crowley's death he had defended proceedings in the California Court (“the California Palimony Proceedings”) brought by his former paramour Edelstein who had claimed an interest in certain of Crowley's assets including his interests held in the various Anguillian entities.

• (h) Clause 5 of the Agreement provided a sell/purchase provision in favour of the surviving shareholder upon the death of the other at a selling price to be determined in accordance with Clause 6 of the Agreement. Clause 5 also provided that the trigger date for determining the price of the deceased shareholder's shares was the date of death of such Shareholder.

• (i) The Agreement also provided, inter alia, for restriction on the sale, transfer or disposition of the shares in the Schedule A Corporations and the Shareholders certificates for shares held by them were to bear legends reflective of such restrictions.

• (j) Crowley having died, De Joria has sought to invoke the provisions of the Agreement, specifically Clauses 5 and 6 thereof, in respect of the sale and purchase of Pendragon's shares in CDC and the price to be paid therefor, the contention being that Crowley and himself intended to bind and did bind Pendragon, Island, and the Schedule A Corporations to the Agreement, and by extension, CDC to the Agreement.

• (k) The claimants aver that they did in fact appoint an appraiser for Pendragon's 50% share in CDC purportedly in pursuance of the terms of the Agreement but says this was at the insistence of De Joria who had produced the Agreement to them just a few days after Crowley's death when they were in a state of bereavement and before they were able to fully read or understand the same or had an opportunity to seek legal advice thereon. They say this was the first time they became aware of the existence of the Agreement. The valuation resulting from this placed the value of Pendragon's 50% ownership in the region of US $43 million.

• (l) Whilst Crowley was alive, there were third parties namely, Campari International (“Campari”) and Barcardi Limited (“Barcardi”) interested in purchasing CDC or its assets. Campari in April, 2003, had indicated its interest in purchasing CDC's assets for US $ 150 Million. De Joria in a letter to Crowley on 12th April, 2003 described the Campari offer as “very low”. After Crowley's death in April, 2003 Barcardi renewed its interest in purchasing CDC or its assets or Pendragon's shares and made this interest known to Pendragon by letter dated May 18 h 2004 and indicated that they believed Pendragon's shares to be worth in the region of US $200 Million.

• (m) The 1st and 2nd claimants say that Crowley's investment banking firm had estimated the fair market value of Pendragon's shares to be approximately $US 150–175 Million shortly after Crowley's death.

4 It is reasonable to surmise that this considerable disparity in value of Pendragon's shares as given by the appraiser pursuant to the Agreement,...