The BF&M Shareholders' Association will apply this autumn to the Supreme Court for a ruling that may end the legal battle over BF&M shares sought by the liquidators of Bermuda Fire & Marine Insurance Company.

Fire & Marine's liquidators want the BF&M stock, which was transferred by way of dividend in September, 1991 as part of the controversial break-up of Bermuda Fire & Marine into a profitable local company (BF&M) and BFMIC, which later went into receivership.

BFMIC's are seeking the BF&M stock -- held by about 1,000 shareholders -- under the Conveyancing Act, which allows a creditor or an aggrieved party to recover property.

They must first demonstrate that the recipient of the property gave no good or valuable consideration for the property and knew that the debtor was disposing of it in order to shield his assets from creditors.

But Sir John Sharpe, interim chairman of the shareholders' association, wrote to the membership this month that Queen's Counsel David Oliver had advised that the liquidators would not be able to succeed under the Act.

Sir John said an application will be made on behalf of the members asking if the Supreme Court agreed with their interpretation of the Act.

"If our interpretation is adopted by the Court, the plaintiff's claim, as presently formulated, would be viewed by the Court as absolutely hopeless and the Court would then be in a position to dismiss the claim against shareholders,'' Sir John wrote.

The application would seek clarification as to whether or not the Act requires written documents by which the property is legally transferred from the debtor to the shareholder recipient. The association believes that such a document is required, and say none exists in this case.

The association may also argue that a shareholder in a company is presumed to have given good or valuable consideration for a dividend. If correct, the letter said, the case would be dismissed, provided the shareholders had no knowledge of any intent on the part of BFMIC to defraud its creditors.

"Based on all the information examined in this case,'' the letter said, "we are satisfied that the vast majority of shareholder defendants would not have known what information was available to BFMIC and what motivated it to declare the September, 1991 dividend.'' The defendants also claim that the plaintiffs must prove that the shareholders knew of a BFMIC attempt to defeat claims of its creditors. And in the absence of such proof, they argue, it would be wrong to require each shareholder to appear in Court merely to confirm no knowledge of any BFMIC wrongdoing.

The letter also advises that the plaintiffs have recently filed an application to change the wording in their Statement of Claim.

The letter said: "The proposed amendments allege that the dividend in specie was defective in that no transfer form was used; the dividend was paid out of capital; the dividend was a fraud on the creditors (a similar allegation to their claim under Section 37 of the Conveyancing Act); and any subsequent dividends paid by BF&M should be returned to the plaintiffs.

"The plaintiffs must obtain the permission of the Court before they can amend their Statement of Claim.

"We have placed the plaintiffs on notice of our intention to object to their application as we consider the proposed amendments to be without merit and bound to fail.'' SUPREME COURT CTS