GEM MANAGEMENT LTD V FIREFOX LTD AND OTHERS 2022 UKPC 17
This appeal before the Judicial Committee of the Privy Council (Privy Council) raised a question of interpretation of a contract (the ‘Agreement’) entered into by Gem Management Limited (‘GEM’) and a group of shareholders who owned 35% of the shares in Deep River Investment Ltd (the ‘Shareholders’). The Agreement contained an “irrevocable and unconditional undertaking” by the Shareholders, referred to as “the Commitment”, to pay to GEM a sum described as a “Commitment Consideration” upon the sale of their shares in Deep River Investment Ltd to any party other than GEM (or its nominees) at any time during the “Commitment Period”. It is not in dispute that the Shareholders subsequently sold their shares in Deep River Investment Ltd to a third party.
The issue on the appeal turned on the interpretation of the Agreement which had a termination date of 31 December 2012 but which included a clause that allowed GEM to extend the term of the Agreement to 31 December 2013. In particular, whether GEM could lawfully extend the term of the Agreement after the stated termination date of the 31 December 2012, and therefore claim the Commitment Consideration.
GEM relied on two of these provisions which have been referred to as the “Late Notice Waiver” and the “Delayed Exercise Clause”. These clauses provide as follows:
“The Shareholders hereby waive promptness, diligence, notice of acceptance and any other notice with respect to the Commitment and any other document related thereto. We furthermore waive any right to revoke this Agreement, and acknowledge that this Agreement is continuing in nature.” (the “Late Notice Waiver”)
“No failure on the part of GEM to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right …”
(the “Delayed Exercise Clause”)
The Shareholders argued that, under the Agreement, the right to extend the Commitment Period could not be exercised after it had ended and the extension notice served on 12 November 2013 had no effect. Hence, the sale of the Shareholders’ shares did not trigger the Commitment and GEM’s claim cannot succeed.
On the other hand, GEM relied on articles 1161 and 1157 of the Civil Code which require the court to construe the contract as a whole and to favour an interpretation which renders each clause effective rather than ineffective. The argument from GEM was that a proper interpretation of the Agreement as a whole, which gives effect to the Delayed Exercise Clause and the Late Notice Waiver, compels the conclusion that GEM was entitled to exercise its right to extend when it did as an exercise during the Commitment Term would not give rise to any delayed exercise or late notice waiver.
The Privy Council held that even though the Agreement did not state in terms that the right of GEM to extend the commitment period until 31 December 2013 could not be exercised after 31 December 2012, it was to be considered as the only reasonable interpretation of the Agreement inasmuch as the Privy Council reaffirmed the essential approach to contractual interpretation, flowing from Article 1156 of the Civil Code, as per Bahemia MH & Partner Ltd v Production Menuiseries Industrielles Ltd 2016 SCJ 66:
“the Court should not restrict itself to a literal interpretation of the contract but rather ascertain the common intention (volonté commune) of the parties bearing in mind the context in which the contract was drawn up as well as the surrounding circumstances. The Court may draw appropriate inferences to give effect to the ‘volonté commune’ of the parties…”
Furthermore, the Privy Council held that
(i) it could not be found that general boilerplate clauses such as a Delayed Exercise Clause and a Late Notice Waiver clause could enable the termination date of an agreement to be automatically extended so as to enable a party to use such boilerplate clauses, and
(ii) “no reasonable person could have intended the contract to operate in such a capricious way”. A Delayed Exercise Clause and a late Notice Waiver could only apply while the Agreement was in “full force and effect” – which is to say before the Termination Date and during the Commitment Period, because it was only during this period that the right to extend the Commitment Period was capable of being exercised and could therefore, at least theoretically, be waived.
The Privy Council further held that if there was any relevant ambiguity in the Agreement, Article 1162 of the Civil Code would require it to be resolved against the Shareholders as they were the parties which were assumed to be responsible for drafting the Agreement.
THE REQUIREMENTS FOR AN EXEQUATUR
In Bredbury Management Ltd v Liechtensein Public Prosecutor 2022 SCJ 285, the Applicant applied under Article 546 of the Code de Procédure Civile to declare executory in Mauritius and to give effect to a judgment of the Princely Supreme Court of the Principality of Liechtenstein delivered on 8 May 2020. The purpose of the exequatur proceedings before the Supreme Court of Mauritius was a preliminary step for a due diligence exercise since the funds, belonging to the husband of a life insurance policy holder, were being administered by a management company in Mauritius.
The Supreme Court referred to the case of D’Arifat & Ors v Lesuer 1949 SCJ 191 which sets out the conditions which need to be satisfied to grant an exequatur of a foreign judgment:
- the judgment must still be valid (‘ait une existence légale’) and be capable of execution in the country where it was delivered;
- it must not be contrary to any principle affecting public order;
- the Defendant must have been regularly summoned to attend the proceedings; and
- the Court which delivered the judgment must have had jurisdiction to deal with the matter submitted to it.
The Court further noted that it was trite law that in addition to the requirements mentioned by the full bench of the Supreme Court in D’Arifat (supra), an Applicant must, in the first place, establish that it has an interest in obtaining an exequatur in Mauritius.
The application was set aside by the Supreme Court who found that the Applicant failed to establish any link between itself and the fact that the funds belonging to the husband of insurance policy holder are currently administered by a management company in Mauritius and for eventual due diligence purposes. The Supreme Court further pointed out that neither the Applicant nor the Respondent was domiciled in Mauritius and there was no indication that the Applicant had any asset or any property right to be protected in Mauritius.
THE IMPORTANCE TO JOIN MANAGEMENT COMPANIES AS PARTIES TO LEGAL PROCEEDINGS PERTAINING TO GLOBAL BUSINESS LICENSE
In Hemsley Holdings Ltd V Sreetharan Vallipuram & Ors 2022 SCJ 244, the Court had to determine two issues relating to two motions made before the Supreme Court of Mauritius. The first issue was whether Juristax, as the current management company of Hemsley Holdings Ltd (‘Hemsley Holdings’), could be joined as a party to the case despite the objection of Respondent no.1. Secondly, whether the Co-Respondents No. 1 and 2 (the former management companies) could be removed as parties to the case. The main argument of the former management companies was that the applications did not disclose any claim against them and all acts, complained of, occurred prior to their appointment as management companies. Furthermore, there was no remedy or prayer being sought against the former management companies.
As regards to the first motion, the Supreme Court re-affirmed the cardinal principle that only interested parties need to be joined as parties and held that Juristax, as current management the Company, must be joined as a party to the case inasmuch as the Registrar of Companies had already approved the appointment of Juristax as the management company. Hence, it was essential that Juristax to be joined as a party in order to resolve any allegation made by Respondent No. 1 as regards its appointment as the management company. Moreover, Juristax would also be able to confirm any agreement that it has with the Applicant’s ultimate beneficial owner pursuant to the FSC Guidelines for Management Companies, which is a matter that only Juristax will be able to confirm.
In the same vein, the Supreme Court held that maintaining the former management companies of Hemsley Holdings as parties was vital at this juncture since the former management companies may also assist to shed light on their involvement vis-à-vis the Respondent No. 2 despite the fact that they may have been the management companies at different periods. The Supreme Court further reaffirmed the principle enunciated in the case of Canarapen L. v J. Anne [1999 SCJ 293] which states that the mere fact that no relief has been asked for, is not a sufficient reason for a party to be put out of cause.
THE SERVICE OF A STATUTORY DEMAND ON A COMPANY
The main issue in Societe SQL v Expiation International Limited 2022 SCJ 300 was whether the service of a statutory demand on the siblings of the directors of a company at their domicile would amount to legal proceedings for the purpose of service of documents as provided under section 323 of the Companies Act 2001 (‘Companies Act’) which reads as follows:
“323. SERVICE OF DOCUMENTS ON COMPANY IN LEGAL PROCEEDINGS
- A document in any legal proceedings may be served on a company:
- by delivery to a person named as a director of the company on the register of companies;
- by delivery to an employee of the company at the company’s head office or principal place of business;
- by leaving it at the company’s registered office or address for service;
- by serving it in accordance with any directions as to service given by the court having jurisdiction in the proceedings; or
- in accordance with an agreement made with the company.
- The methods of service specified in subsection (1) are, notwithstanding any other enactment, the only methods by which a document in legal proceedings may be served on a company in Mauritius.”
On one hand, the Court held that a statutory demand was not “legal proceedings”, as provided under section 323 of the Companies Act, as it was not bestowed with any order of the Supreme Court for a statutory demand to be issued and served on a debtor. Instead, this would be governed by section 324 of the Companies Act which provides for service of other documents on a company.
On the other hand, the Court found that an application made to the Supreme Court to setting aside a statutory demand, as provided under the Insolvency Act 2009, would amount to “legal proceedings” for the purposes of service of document on a company will be governed by section 323 of the Companies Act.
For further information, please contact:
Dylan Mannikum, Appleby
dmannikum@applebyglobal.com
