Autoclear LLC v Conway et Al
| Jurisdiction | Belize |
| Judge | Abel, J. |
| Judgment Date | 05 March 2015 |
| Court | Supreme Court (Belize) |
| Docket Number | 177 of 2014 |
| Date | 05 March 2015 |
Supreme Court
Abel, J.
177 of 2014
Mr. Godfrey Smith S.C. and Ms. Leslie Mendez for the applicants/defendants.
Mr. Rodwell Williams S.C and Mrs. Julie-Ann Ellis Bradley for the respondent/claimant.
Arbitration - Forum non conveniens — Whether the claim should be stayed on the ground of forum non conveniens where the re domiciliation and the removal of the arbitration agreement were the only connection to Belize — Consideration of BCB Holdings Ltd and Belize Bank Ltd. v. Attorney General [2013] CCJ 5 (AJ), [2014] 2 L.R.C. 81 — Re domiciling — Consideration of principles in Anthony Rath et al v. Birdsall, Voss & Associates and Anthohony Rath et al v. The Belize Tourism Board and Belize Hotel Association Consolidated Claims Nos. 456 of 2011 and 26 of 2013 — Claim stayed — Sections 1, 3, 12, 63, 87 88 and 89 of International Limited Liability Companies Act — Convention On the Recognition and enforcement of Foreign Arbitral Awards, signed at New York, United States, June 10, 1958
This is an application filed on the 11th July 2014 by the 1st, 2nd, 3rd, 4th, 5th, 6th, and 7th applicants/defendants (“the applicants”) against the respondent/claimant “the respondent”) essentially to stay the claim herein on the ground of forum non conveniens. The applicants are led by G. Todd Conway, the 1st applicant and the respondent is led by Bradley Conway.
The application has been brought on the basis that there is an ongoing arbitral proceeding in New Jersey USA and that the USA, and not Belize, is the most natural and appropriate forum for the present dispute between the parties. The applicants, more specifically, allege that the present claim was brought in Belize to eviscerate the jurisdiction of the Arbitrator who has made orders adverse to the applicant.
Another ground was relied on in the application, that the Claim should be struck out as an abuse of process, but in their oral submissions the applicants have confined themselves to ‘forum non conveniens’ and it is on this basis that I have decided the application.
The respondent has vigorously contested the application.
On the 22nd December 2014 I heard the application and ordered a stay on the ground of forum non conveniens with costs of the application to be paid by the respondent to be agreed or assessed. Although I then gave some oral reasons for my decision I indicated that more detailed reasons would follow.
These are my more detailed reasons.
The respondent was originally formed in New Jersey under the name Control Screening LLC on the 29th February 1995 and being a limited liability company was organized pursuant to the laws of the State of New Jersey, with a principal place of business and registered office located at 234 Industrial Parkway, Northvale, New Jersey 07647, United States of America.
The respondent's managers and sufficient members signed the Operating Agreement which governed the respondent's affairs on the 1st April 1995. The Operating Agreement at Paragraph 13 contains the following clause:
“ARBITRATION: ANY MATERIAL DISPUTE HEREUNDER SHALL BE DECIDED IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION WHICH AWARD SHALL BE FINAL.”
The respondent is engaged in the business of designing, building, distributing and servicing security screening systems worldwide, and in acquisitions that facilitate that and other company purposes.
The applicants are all investors or equity holders in the respondent.
A dispute arose in relation to the management control of the respondent from about October 2010 led by 2 groups of investors or equity. One group was led by G Todd Conway and the other group by Bradley Conway. As will be seen this dispute is still continuing.
In 2011, Belize passed the International Limited Liability Companies Act (“ILLCA”) into law and the Superior Court of the State of New Jersey ordered, pursuant to an undoubted arbitration agreement in the Operating Agreement, that the issues regarding the management and control of the respondent should be submitted to arbitration.
On the 23rd May 2011, the respondent (led by Bradley Conway acting as Chairman and Manager of the respondent) instituted arbitration proceedings against several persons including the applicants, as a result of a dispute relating to the management and control of the respondent (“Arbitration of the pre 2013 issues” or “the Arbitration”) and pursuant to the Arbitration agreement in the Operating Agreement. This Arbitration was conducted under the auspices of the American Arbitration Association before Robert C. Garofalo as the Arbitrator (“Arbitrator”).
The Arbitration of the pre 2013 issues has not been resolved and the Arbitration continues.
On the 15th May 2013, while the dispute was continuing before the Arbitrator, the domicile of the respondent was transferred to Belize pursuant to ILLCA. At the time of re-domiciliation the respondent's headquarters and principal place of business was 2 Gardner Road, Fairfield, New Jersey 07004, United States of America, although the respondent carries on business worldwide (apparently in over 150 countries) through numerous subsidiaries for tax benefits.
The applicants allege, which I accept, that this transfer was done surreptitiously and without notice to them. This dispute is obviously a matter for determination but clearly the legal procedure to effect the re-domiciliation was complied with as the respondent is now registered (until set-aside) in Belize and has the appropriate registration documents as an LLC under the ILLCA.
By virtue of the above dispute as to the bona fides of the re-domiciliation, it is clear that this issue is a central question for determination and cannot be resolved at this interlocutory stage of the proceedings. The question remains which forum and tribunal will hear and resolve the issue.
On the 7th January 2014 the applicants, and others, purported to convene a meeting of the respondent off premises at which resolutions were purportedly passed as follows:
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(a) Removing Brad Conway as CEO of the respondent (the applicants had already purported to pass resolutions on the 16th November 2013 removing Brad Conway as Manager and Chair of the respondent).
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(b) Acting as a new replacement Board of Managers; and
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(c) Appointing G. Todd Conway as interim CEO of the respondent.
The respondent's Operating Agreement was subsequently amended by a Consolidating Amendment dated June 2013, which purports to replace all prior amendments, and an amendment by Members' Resolution dated 22nd January 2014. Included in the amendments of the Operating Agreement is the removal of the arbitration agreement with the effect of avoiding the jurisdiction of the arbitration and the Arbitrator and to require arbitration in Belize under Belize law.
In January 2014 the applicants authorized G. Todd Conway to contact senior employees, and to inform all employees that he was the “real” CEO, and that Bradley Conway, the long standing CEO since 1989, and Chair since 2004, should be “locked out” of the business.
The applicants also authorised their attorneys to write to and call the respondent's three main banks, including its mortgage banker, representing that their “Board” and “CEO” were in control, and that they should disregard Bradley Conway and the current signatories.
The expulsion of the aforesaid persons as members was also considered at a meeting of members held on the 21st March 2014, and by majority vote of the remaining members' interests, it was determined that they have been expelled as members of the respondent, but not as economic interest holders.
On the 14th April 2014 the respondent commenced the present claim against the applicants.
There have been some interim decisions by the Arbitrator concerning the interpretation of the Operating Agreement. The Arbitrator is seised of and dealing with the dispute on an on-going basis.
In particular, the applicants claim, most of which is disputed by the respondent, that the Arbitrator ruled and made the following orders:
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(a) In an Order dated 2nd January, 2014 that the Members of respondent may elect or remove Managers only by a majority vote of the Member interest;
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(b) The respondent's managers were not entitled to elect or remove the company's management.
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(c) Brad Conway's purported November 2010 “amendments” to the Operating Agreement were ultra vires, null and void because they were beyond the power of the Managers to enact.
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(d) By Order dated 17th January, 2014 the respondent and Bradley Conway were restrained from transferring any asset of the respondent to a foreign jurisdiction without the written approval of the Arbitrator, except in the ordinary course of business.
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(e) By Order dated 3rd March, 2014 that Brad Conway and the respondent have consented to the jurisdiction of the Arbitration proceedings and the State of New Jersey for and in connection with all matters pertaining to the respondent's Operating Agreement.
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(f) By Order dated 1st April, 2014 that:
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I. Bradley Conway and the respondent without notice to the Members as required by the Operating Agreement and unbeknownst to their attorneys, transferred the domicile of the respondent to Belize;
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II. Neither the respondent nor anyone acting on its behalf (including Brad Conway) shall commence any action or proceeding involving the issues in this Arbitration in Belize or any other jurisdiction than the State of New Jersey, under and pursuant to the Rules of the American Arbitration Association and the State of New Jersey; and III. In the event the respondent, or anyone on its behalf, file any such action, the Company shall be responsible for and pay all reasonable and necessary legal fees and expenses incurred by defendants in opposing...
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