Kathryn Ma Wai Fong v Wong Kie Yik and 2 others (British Virgin Islands)

In an unfair-prejudice claim under the British Virgin Islands Business Companies Act 2004, equitable constraints on majority powers do not arise merely because a company is family-owned or holds dynastic wealth. They depend on the parties’ actual understandings, legitimate expectations or established practices. A family member or heir has no automatic right to participate in management, veto a transaction, or obtain winding-up relief because trust has broken down. Where directors have not separately considered a company’s interests, the objective test is whether honest directors in their position could reasonably have believed that the transaction benefited that company. Statutory non-compliance may be capable of constituting unfair prejudice, but does not automatically establish it. An appellate court will rarely disturb concurrent factual findings absent a miscarriage of justice or material legal or procedural error.

Ms Ma, widow of WKN, held one of three shares in STIC, a British Virgin Islands company whose principal asset was a holding in WTK Realty. Her brothers-in-law, WKY and WKC, held the other two shares. Following WKN’s death, they caused STIC to convert non-voting preference shares in WTK Realty into ordinary voting shares. Ms Ma claimed that the conversion was unfairly prejudicial under section 184I of the British Virgin Islands Business Companies Act 2004.

The first-instance judge dismissed the claim but ordered WKY and WKC to buy Ms Ma’s share. The Court of Appeal dismissed her appeal and upheld that order. The central issues before the Board were whether family-company considerations or an agreement constrained the conversion, whether the conversion involved improper purpose or statutory breaches, and whether the remaining complaints justified relief.

The Board dismissed the appeal and advised that the first-instance buy-out order should stand.

1. Equitable considerations. The categories in which equitable considerations may arise are not closed. However, the family or dynastic character of a company does not itself create a legitimate expectation of equal management participation, unanimous consent, or a veto over major decisions. Actual agreements, understandings or established practices may constrain strict legal rights, but none was proved here. Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 and Gallelli Estate v Bill Gallelli Investments Ltd (11 February 1994 Doc Calgary 9301-14042) did not assist Ms Ma. Chow Kwok Chuen v Chow Kwok Chi and another [2008] SGCA 37; [2008] 4 SLR(R) 362 concerned just-and-equitable winding up in circumstances of practical deadlock. It did not establish a right for a descendant to demand winding up where the company could continue to operate effectively.
2. Directors’ duties and purpose. The Board upheld the concurrent factual finding that the conversion was undertaken to facilitate refinancing, not to change voting control. The principle in Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 therefore did not establish an improper purpose on these facts. Where directors fail to consider the separate interests of a company, the objective test in Charterbridge Corpn Ltd v Lloyds Bank Ltd [1970] Ch 62 and Antow Holdings Ltd v Best Nation Investments and others BVICMAP2017/0010 asks whether honest directors in their position could reasonably have believed that the transaction benefited that company. STIC’s investment was objectively preserved, so no fiduciary breach was established.
3. Statutory complaints. Even if the alleged treatment of the earlier payment breached section 59 of the Malaysian Companies Act 1965, that did not amount to unfair prejudice to Ms Ma as a shareholder of STIC. The Board accepted that disregard of section 175 of the British Virgin Islands Business Companies Act 2004 could in some circumstances constitute unfair prejudice, but held that the majority’s approval of the conversion and the absence of a formal member resolution did not do so here, whether or not section 175 had been breached.
4. Other grounds and appellate review. The high threshold for interfering with concurrent findings of fact, reaffirmed in Devi v Roy [1946] AC 508, was not met. Central Bank of Ecuador v Conticorp SA (Bahamas) [2015] UKPC 11; [2016] 1 BCLC 26 was an exceptional case and did not dilute that principle. STIC’s substratum extended beyond holding the preference shares, and the information and dividend complaints failed without an equitable modification of the legal and constitutional rights. The buy-out order remained because the respondents had not cross-appealed and accepted it.

• Privy Council. On 9 May 2022, the Board dismissed Ms Ma’s appeal: [2022] UKPC 14.
• Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands). On 27 March 2019, the Court of Appeal dismissed Ms Ma’s appeal and upheld the first-instance buy-out order.
• High Court of Justice, Virgin Islands (Commercial Division). On 14 December 2017, Justice Adderley dismissed the unfair-prejudice claim but ordered WKY and WKC to acquire Ms Ma’s share in STIC.