Byers and others v Chen Ningning (British Virgin Islands)

An appellate court should interfere with concurrent findings of fact only in rare or unusual cases involving an identifiable material error or miscarriage of justice. Excessive delay in delivering an appellate judgment does not, by itself, invalidate it. The appellant must show that the delay probably or possibly caused errors, that the judgment is unsafe, and that allowing it to stand would be unfair.

Where insolvent liquidation is inevitable, a director must act honestly and in good faith for the company’s best interests, including the interests of its creditors, and exercise powers for proper purposes. A director who knows that company assets are being improperly depleted must take reasonable steps to prevent it. Delegation does not remove that duty. Knowingly failing to stop an improper payment can constitute authorising or causing it. The Duomatic principle may permit informal consent by a sole shareholder or ultimate beneficial owner.

The joint liquidators of Pioneer Freight Futures Ltd claimed US$13m from Miss Chen, alleging that she breached fiduciary duties by causing or permitting repayment of a loan to Zenato Investments Ltd when PFF was insolvent. They also sought relief under sections 244, 245 and 249 of the Insolvency Act 2003.

Bannister J rejected the fiduciary claim, finding that Miss Chen had ceased to be a director before the payments and had not caused or procured them. The Court of Appeal dismissed the appeal, although it regarded the payments as an unfair preference and declined to order relief. The Board considered the adequacy of the judgments, appellate delay, challenges to factual findings, the continuation of Miss Chen’s directorship, her fiduciary duties in insolvency, and the statutory remedies.

Appeal allowed. Lord Kitchin delivered the single judgment. The Board intervened because the finding that Miss Chen ceased to be a de jure director in early August 2009 was unsupported and rested on material errors. The main conclusions were agreed by all five members who heard the appeal.

1. Appellate review. Applying Henderson v Foxworth Investments Ltd [2014] 1 WLR 2600, the Board reaffirmed the high threshold for disturbing factual findings. Concurrent findings by two lower tribunals should ordinarily be respected, subject to the exceptional approach explained in Central Bank of Ecuador v Conticorp SA [2015] UKPC 11 and Devi v Roy [1946] AC 508. The need for caution is heightened when reversing a finding exonerating a party of lack of probity.
2. Delay and concise judgments. Excessive delay is serious and may increase the risk that an appellate judgment is unreliable. It does not alone justify intervention. The approach in Cobham v Frett [2001] 1 WLR 1775 was adopted: the appellant must show delay-attributable error, an unsafe judgment, and unfairness in allowing it to stand. The Court of Appeal’s detailed judgment contained no error attributable to delay. Concision and expedition are generally virtues, although they cannot excuse inadequate reasons or failure to address material issues.
3. Directorship. Under sections 109(4) and 109(6) of the BVI Companies Act 2004, the absence of evidence that Mr Gan was validly appointed was material. Although Miss Chen’s resignation letter was genuine and initially intended to operate on 29 May 2009, she continued to act as a director. Under Glossop v Glossop [1907] 2 Ch 370, resignation could not be withdrawn without the company’s consent. The Duomatic principle, stated in In re Duomatic Ltd [1969] 2 Ch 365 and applied in Ciban Management Corpn v Citco (BVI) Ltd [2020] UKPC 21, permitted the relevant informal consent. But there was no evidence that she resigned in August. The judge’s mistaken assumption that this was common ground and his treatment of the later evidence were fundamental errors. Miss Chen therefore remained a de jure director.
4. Fiduciary duties and breach. Sections 120(1) and 121 of the BVI Companies Act 2004 required her to act honestly and in good faith in PFF’s best interests and for proper purposes. Once insolvent liquidation was inevitable, those duties required regard to PFF’s unsecured creditors. The ordinary power of the owner to waive or ratify a breach was displaced. A director could not evade the duties by delegation. The principles in Walker v Stones [2001] QB 902, Neville v Krikorian [2006] EWCA Civ 943 and Lexi Holdings v Luqman [2007] EWHC 2652 (Ch) applied. Miss Chen knew of the improper repayment and, as sole signatory, could have prevented it. Her inaction breached her fiduciary duty and fell within the pleaded case of authorising, causing or procuring the payments.
5. Statutory remedy. The Board did not determine the additional claims under sections 244, 245 and 249 of the Insolvency Act 2003. An account for breach of fiduciary duty was sufficient and could provide no less valuable a remedy. The Board advised that the appeal be allowed and invited submissions on the appropriate order.

• Privy Council: On 22 February 2021, allowed the appeal and invited submissions on the appropriate form of order.
• Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands): Judgment delivered on 12 June 2018. Dismissed the liquidators’ appeal on all grounds, while holding that the payments were an unfair preference but declining to order relief.
• High Court of Justice of the British Virgin Islands: Bannister J delivered judgment on 19 March 2015. Rejected the fiduciary-duty claim and held that the statutory provisions did not independently generate an obligation on the findings made.