Annuity & Life Re Ltd v Kingboard Copper Foil Holdings Ltd
| Jurisdiction | Bermuda |
| Judge | Mussenden J |
| Judgment Date | 29 June 2021 |
| Court | Supreme Court (Bermuda) |
| Docket Number | CIVIL JURISDICTION (COMMERCIAL COURT) 2018: No. 359 |
[2021] SC (Bda) 52 Com
In The Supreme Court of Bermuda
Williams J
CIVIL JURISDICTION (COMMERCIAL COURT) 2018: No. 359
Keith Robinson and Sam Stevens, Carey Olsen Bermuda Limited, for the Plaintiffs
Jeffrey Elkinson, Conyers Dill & Pearman, for the Defendants
Application to strike out part of the Amended Statement of Claim
This matter came before me by Summons dated 22 October 2020 in respect of an application by the Defendants to strike out paragraph 12A of the Plaintiffs' Amended Statement of Claim (“ ASoC”) pursuant to Order 18, rule 19(1) of the Rules of the Supreme Court 1985 (“ RSC”) on the grounds that: (a) it discloses no reasonable cause of action; (b) it is scandalous, frivolous or vexatious; and (c) it is otherwise an abuse of the process of this Court. The application is supported by the First Affirmation of Norman Hau dated 29 September 2020 (“ Hau 1”) together with its Exhibit NH-1.
The Plaintiffs oppose the application. They rely on the First Affidavit of William Paul Wells dated 30 November 2020 together with its Exhibit WPW-1 and the Affidavit of Chui Lijun dated 30 November 2020, exhibiting the Expert Report prepared by Chui Lijun dated 30 November 2020 marked as Exhibit CL-1.
These proceedings arise out of a long-running and complex litigation between the parties involving claims of minority shareholder oppression, which claims came before the Bermuda Court of Appeal in Civil Appeal No. 24 of 2015 (“ Antecedent Litigation”). Subsequent to the Court of Appeal's Ruling, in April 2018 the parties entered into an agreement to settle the Antecedent Litigation (“ Settlement Agreement”), the First and Second Plaintiffs agreeing on 3 April 2018 and the Defendants affixing their signatures on 5 April 2018. These proceedings relate to actions taken by the Defendants in Singapore which the Plaintiffs allege trigger a right to be paid further monies pursuant to the terms of the Settlement Agreement.
Clause 7 of the Settlement Agreement (“ Clause 7”), which the Defendants say was substantially drafted by the First Plaintiff, provided that in certain circumstances there could be further entitlements due to the Plaintiffs:
“7. FURTHER ENTITLEMENT IN THE EVENT OF CERTAIN TRANSACTION
In the event that any of Kingboard Respondents [the Second to Fifth Defendants], the Company [the First Defendant], or any of their Affiliates (as defined above in Clause 4) enters into a transaction within 12 (twelve) calendar months from the date herein to the effect that the ordinary shares of the Company are offered to be purchased or are issued at a price exceeding S$0.45 per ordinary share, the Purchasers shall pay the Petitioner [the First Plaintiff] and Pope [the Second Plaintiff] respectively an additional payment of an amount which equals to:
(Transaction price per ordinary share — S$0.45) x number of ordinary shares being sold under this Agreement (i.e. 17,361,000 in the case of the Petitioner [the First Plaintiff]; and 20,928,344 in the case of Pope [the Second Plaintiff])”.
On 22 October 2018 the Plaintiffs filed a Specially Indorsed Writ of Summons against the Defendants alleging, inter alia, that the Defendants had failed to pay to the Plaintiffs amounts due to the Plaintiffs under Clause 7 by reason of, they allege, a transaction entered into by the First and/or Fourth Defendant within 12 (twelve) calendar months of the Settlement Agreement.
On 27 November 2018 the Defendants filed their Defence and the Plaintiffs filed their Reply on 10 December 2018.
On 4 April 2019, the Fourth Defendant, Excel First Investments Limited (the “ Offeror”) issued an announcement, notifying that it intended to make a voluntary unconditional cash offer (the “ Offer”) for all the issued and paid-up ordinary shares of a par value of US$0.10 each in the capital of the First Defendant (the “ Offer Announcement”).
On 18 April 2019 the Offeror issued an offer document setting out the terms and conditions of the Offer (the “ Offer Document”), which was despatched to the shareholders in the First Defendant (together with the Form of Acceptance and Authorisation for Offer Shares and Form of Acceptance and Transfer for Offer Shares).
On 16 May 2019 the Offeror issued an announcement titled “Close of the Offer” and “Final Level of Acceptances of Offer” (the “ Close of the Offer Announcement”), stating that the Offer closed at 5:30pm on 16 May 2019, and “ valid acceptances to the Offer, amount to an aggregate 710,738,549 Shares, representing approximately 98.37% of the total issued Shares”.
On 21 May 2019 the Offeror issued an announcement titled “Update in relation to Close of the Offer Announcement” (the “ Update Announcement”), stating that “ the number of valid acceptances of Offer Shares received was 75,838,928 Offer Shares, representing approximately 10.50% of the entire issued share capital of the company”.
On 27 November 2019 the Plaintiffs amended their Specially Indorsed Writ of Summons. The Amendments incorporated in the ASoC now included the addition of paragraph 12A, as follows:
“Further, on 4 April 2019 (and therefore, under a year since the Settlement Agreement and Release was executed and exchanged), the First Defendant issued a document announcing the Fourth Defendant's “Voluntary Unconditional Cash Offer” in which the price was “S$.60 in cash for each Offer Share” constituting the First and/or the Fourth Defendant's entry into transactions to the effect that the ordinary shares of the Company are offered to be purchased or are issued at a price exceeding S$0.45 per ordinary share within the meaning of Clause 7 of the Settlement Agreement and Release. On 16 May 2019 the Fourth Defendant announced that it has received acceptances in respect of 75,248,928 ordinary shares.”
The Defendants submit that paragraph 12A should be struck out for several reasons. They state in reading Clause 7 it is a plain and obvious case that there is no realistic possibility of the Plaintiffs having a cause of action based on its terms as pleaded by them in paragraph 12A of the ASoC. They submit that the Plaintiffs are seeking to gain a significant benefit of approximately US$5 million based on the claim in paragraph 12A of the ASoC.
First, they submit that Clause 7 can only be engaged if the Defendants (or their Affiliates) entered into “ a transaction … to the effect that the ordinary shares of the Company are offered to be purchased or are issued at a price exceeding S$0.45 per ordinary share” within 12 calendar months of the date of the Settlement Agreement (the “ 12 Calendar Month Period”). The Plaintiffs plead that the relevant end date for the 12 Calendar-Month Period is 5 April 2019.
The Defendants submit that the evidence shows that:
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a. The “transaction” alleged by the Plaintiffs (an announcement by the Fourth Defendant that “ it intends to make a voluntary unconditional cash offer”) references an Offer Document dated 18 April 2019 and did not take place within 12 calendar months as referenced in Clause 7.
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b. Clause 7 does not apply in respect of the “transaction” alleged in paragraph 12A; and
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c. A “transaction” cannot be an announcement to make an offer — it is not an action of passing or making over a thing from one person to another.
Second, the Defendants submit that Clause 7 is not ambiguous and the relevant documents should be read based on their plain and clear meaning under Bermuda law for several reasons as follows:
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a. In respect of the Offer being made pursuant to the regime under the Singapore Code on Takeovers and Mergers (“ the Takeover Code”), the Defendants submit that the Takeover Code is not legally binding, has no legal effect on the law of Bermuda, is non-statutory, and offers no assistance in determining the ordinary meaning of the words in the Settlement Agreement;
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b. The Defendants submit that the language used throughout the Offer Announcement, for example “ will be”, and “ intends to” makes clear that it was merely an announcement of the intention to make an ‘Offer’, as defined in the Takeover Code, in the future;
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c. The Offer Announcement makes express reference to the clear and distinct Offer Document “ to be issued by the Offeror …” which also contained references to other information that would be included in and with the Offer Document, significantly the forms of acceptance and approval;
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d. The Defendants stress that in the absence of the notification to the offerees of the full terms and conditions of the “Offer”, the primary condition of an offer is not met and that no ‘transaction” could have been entered into on 4 April 2019 and thus the very earliest possible date on which any transaction could have occurred was 18 April 2020 — the date when the full terms and conditions were communicated to the First Defendant's shareholders;
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e. The Defendants also rely on the language of the Offer Document itself, particularly where it states “ This Offer Document contains the formal offer by the Offeror, for the Offer Shares on the terms and subject to the conditions set out in the this Offer Document” and “The Offer will be made for all the Offer Shares, subject to the terms and conditions set out in this Offer Document …”; and
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f. The “Offer” was not open for acceptance by the First Defendant's shareholders until after the Offer Document had been despatched, as the Offer Document stated that the Offer is “ open for acceptance by Shareholders for a period of 28 days after the Despatch Date …”, that Despatch Date...
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