Glory Trading Holding Ltd v Global Skynet International Ltd and another (Anguilla)

When a challenge is made to a director’s exercise of a fiduciary power, the court must identify the power and its limits, determine the substantial purpose of the exercise, and decide whether that purpose was proper. It may investigate the decision-maker’s state of mind and motive through surrounding circumstances. A transaction that strips a company’s 100% legal and beneficial owner of its interest and transfers ownership to another for no apparent corporate purpose may require an evidential explanation from those defending it. A positive finding that the director acted for personal benefit establishes improper purpose and breach of fiduciary duty. That finding justifies setting aside the transaction without a separate finding of fraud. Concurrent factual findings are ordinarily respected on appeal.

Global Skynet International Ltd and its beneficial owner, Mr Bloch, challenged transactions by which a director of Skynet Ltd cancelled Global’s sole bearer share, issued all shares to Mr Kravchuk, and thereby transferred control. The High Court of Anguilla set aside the transactions and declared Global the ultimate beneficial owner. The Eastern Caribbean Court of Appeal dismissed Glory Trading’s appeal. Before the Privy Council, Glory Trading argued that the courts had wrongly treated the agreement as conferring rights in unissued shares and had inverted the burden of proof. The central question was whether the concurrent finding that the director acted for an improper purpose, in breach of fiduciary duty and for personal benefit should be disturbed.

1. Appeal dismissed. The Board rejected both grounds of appeal and advised His Majesty accordingly.
2. Proper purpose. The applicable approach required identification of the nature and limits of the fiduciary power, examination of the substantial purpose for which it was exercised, and a conclusion whether that purpose was proper. The court should give credit to a bona fide opinion of directors and respect management judgment, while deciding the ultimate issue itself. The Board applied the guidance in Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821, including the principle drawn from Hindle v John Cotton Ltd (1919) 56 ScLR 625 that motive and state of mind may be established from surrounding circumstances.
3. Mr Hefti knew that Global was the legal and beneficial owner of Skynet. There was no bona fide corporate purpose for the transactions. The evidence supported the finding that he acted for his own benefit, probably to repay a debt owed to Mr Kravchuk. That was an improper purpose and breach of fiduciary duty. Those findings justified setting aside the cancellation and share issue, whether or not the conduct was also fraudulent.
4. The Board did not need to decide whether the agreement transferred a proprietary interest in unissued shares. The material point was Global’s legal and beneficial ownership of Skynet in 2010. It was immaterial whether that ownership was analysed through the sole bearer share or through all the company’s shares, including unissued shares.
5. The passages criticised by Glory Trading did not invert the legal burden of proof. To the extent they addressed proof, they reflected a shift in the evidential burden to Glory Trading to explain a transaction that deprived the 100% owner of its interest and conferred it on another for no apparent consideration. In any event, the judge made a positive finding of improper personal purpose. It was open to him to accept the admissible hearsay evidence supporting that finding.
6. The Board would not go behind the concurrent findings of fact absent the exceptional circumstances identified in Devi v Roy [1946] AC 508, Central Bank of Ecuador v Conticorp SA [2015] UKPC 11, Desir v Alcide [2015] UKPC 24, Al Sadik v Investcorp Bank BSC [2018] UKPC 15 and Pickle Properties Ltd v Plant [2021] UKPC 6. No such sufficient reason was shown.

1. Privy Council: The appeal was dismissed and the Board advised His Majesty accordingly: [2022] UKPC 35.
2. Eastern Caribbean Court of Appeal: On 3 October 2019, the Court of Appeal dismissed Glory Trading’s appeal from the High Court of Anguilla.
3. High Court of Anguilla: On 27 September 2018, Ramdhani J found for Global Skynet International Ltd and Mr Bloch, set aside the transfer of the shares to Mr Kravchuk, and declared Global the ultimate beneficial owner of Skynet.