In a judgment handed down on 21 October 2016, in the case of PT Satria Tirtatama Energindo v East Asia Co et al  SC Bda 90 Com, Mr. Justice Hellman of the Supreme Court of Bermuda has enforced a contract for the sale and purchase of shares in a Bermuda company, and ordered that the Company’s share register be rectified accordingly.
Share rectification applications are fairly common proceedings in Bermuda and other offshore jurisdictions (where there are frequent disputes over the legal and beneficial title to shares, for various reasons), but this case appears to have had a couple of interesting features:
- the Judge had to consider whether the share sale contract, in the form of a Heads of Agreement, was a legally enforceable contract, or an unenforceable ‘agreement to agree’. He decided that it was enforceable, on the basis of recent English case law, even if certain terms remained to be agreed between the parties;
- the Judge held that videoconference participation by Skype was a legally valid method of participation at General Meetings of shareholders, but that shareholder approval was in any event unnecessary for the share sale contract in question;
- the Judge summarily confirmed that, in the case of an insolvent company, the directors’ duties to the company require them to act in the best interests of the “creditors, and the wishes of the shareholders became all but irrelevant“;
- the Judge applied ‘the rule in Turquand’s case’ as a matter of Bermuda law, to the effect that “persons contracting with a company and dealing in good faith may assume that acts within its constitution and powers have been properly and duly performed and are not bound to inquire whether acts of internal management have been regular“;
- the Judge considered the extent of the Company’s power, under section 50 of the Companies Act 1981 and the Bye-Laws, to refuse to register a share transfer.
Ultimately, the Judge described the Plaintiff’s case in favour of rectification as ‘compelling’ and the Defendants’ position as being ‘without foundation’, but it remains to be seen whether or not an appeal is pursued, and if any of the Judge’s more interesting conclusions come to be revisited at an appellate level, as a matter of Bermuda law.
By way of update and footnote, it is of interest that the Bermuda Court took some oral evidence through the use of Skype technology (and that it placed some reliance on this fact in support of its conclusion that Skype was appropriate for use at general meetings). The use of Skype at trial appears to have been accepted by the Judge, the parties and their Counsel, but no reference seems to have been made to English case law on the (inappropriate) use of Skype, such as ML (Use of Skype Technology), Re  EWHC 2091 (Fam) (18 July 2013), http://www.bailii.org/ew/cases/EWHC/Fam/2013/2091.html , in which Mr. Justice Peter Jackson dismissed an application to use Skype technology (as opposed to more secure video-link services such as that provided at the time by eyenetwork.com), on the grounds that: “The technology can be very effective for informal use, but does not lend itself to the court environment. There are problems in everyone seeing and hearing the picture and in the evidence being recorded. There are also issues about security. I would not be willing to use this method if there was any alternative“.