Artha Master Fund, LLC v Dufry South America

• Jurisdiction: Bermuda
• Judgment Date: 24 March 2011
• Date: 24 March 2011
• Docket Number: Commercial Jurisdiction 2010 No. 88
• Court: Supreme Court (Bermuda)

In The Supreme Court of Bermuda

Commercial Jurisdiction 2010 No. 88

In the Matter of sections 106(2) and 106(6) of the Companies Act 1981

And in the Matter of Dufry South America Ltd

And in the Matter of an amalgamation agreement between Dufry South America Ltd, Dufry Holdings & Investments AG, and Dufry AG

BETWEEN:

Artha Master Fund, LLC

Plaintiff

and

Dufry South America

Defendant

Mr J Wasty for the Plaintiff

Mr P Smith and Mr C Luthi for the Defendant

The following cases were referred to in the judgment:

Aeronave SPA v Westland ChartersWLR [1971] 1 WLR 1445

Nasser v United Bank of KuwaitWLR [2002] 1 WLR 1868

Texuna International Ltd v Cairns Energy Plc [2004] EWHC 1102 (Com)

Phoenix Global Fund Ltd and Phoenix Capital Reserve Fund Ltd v Citigroup Fund Services (Bermuda) Ltd and the Bank of Bermuda LtdBDLR [2007] Bda LR 61

Abstract:

Appraisal of fair value of shares - Merger - Security for costs - Expert evidence

RULING of Kawaley, J

Introductory

1. The present action, commenced by Originating Summons dated March 15, 2010, seeks "the appraisal by the Court of the fair value of Plaintiff's common shares in the Company".

2. The Plaintiff declined to accept the Company's assessment of the fair value of its shares ("the DSA Shares") for the purposes of a Merger and Amalgamation Agreement dated February 11, 2010 ("the Agreement"). Instead, the Plaintiff invoked its statutory right to seek the Court to appraise the fair value pursuant to section 106(6) of the Companies Act 1981.

3. On May 20, 2010, I gave directions for the filing of expert evidence with liberty to apply on discovery and other pre-trial matters. On August 6, 2010, the Defendant issued a Summons seeking further directions. I ordered directions in relation to this Summons on or about August 12, 2010 by consent. Due to delays in the preparation of a transcript of the May 20, 2010 hearing, the Defendant's Summons could not be heard until the beginning of this week. The Defendant sought the following relief:

i. For the avoidance of doubt, leave to rely upon two experts each;

ii. Leave to adduce expert valuation evidence as to the value of (uncontroversially) the DSA Shares and (controversially) the Dufry AG ("DAG") shares.

iii. Security for costs;

iv. Discovery of all documents relating to the Plaintiff's acquisition of specified investments in the Company on or after January 10, 2010 and sale of DAG shares on or after March 23, 2010.

4. After hearing argument from Mr. Smith, I resolved issue (a) in favour of the Defendant as a result of Mr. Wasty's sensible (albeit belated) concession. After hearing argument

from both counsel on issue (c), I found that the Defendant was in principle entitled to security for costs from the Plaintiff under Order 23 of the Rules. I adjourned the application as regards the quantum of such security after indicating that in the absence of cogent evidence of the Plaintiff's impecuniosity, such costs should be limited to the additional costs attributable to enforcing any costs order abroad. After hearing both counsel on issue (d), I decided that the Defendant was entitled to discovery limited to the timing, pricing and amounts of the relevant DSA purchases and DAG sales.

5. I reserved judgment on (b), the scope of expert evidence issue, indicating that I would deliver judgment on this issue together with reasons for my decision on the security for costs issue.

Reasons for determining that the Defendant is entitled to obtain security for costs

6. The application for security for costs was only explicitly based on the fact that the Plaintiff was resident abroad. The Plaintiff filed no evidence in response and contended that on legal grounds its foreign domicile alone could not justify making the Order sought under Order 23. Mr. Smith invited the Court to infer that the Plaintiff must be impecunious and Mr. Wasty, after the Court signified its intention of ordering security, sought an opportunity to satisfy the Defendant that his client was, in effect, "good for the money". On this basis, the application for security for costs was adjourned.

7. Order 23 rule 1 of the Rules provides in salient part as follows:

"23/1 Security for costs of action, etc.

1 (1) Where, on the application of a defendant to an action or other proceedings in the Court, it appears to the Court-

(a) that the plaintiff is ordinarily resident out of the jurisdiction…

(b)… or

(c)… or

(d)…

then if, having regard to all the circumstances of the case, the Court thinks it just to do so, it may order the plaintiff to give such security for the defendant's costs of the action or other proceedings as it thinks just.

(2)…

(3)…"

8. The Defendant sought security firstly on the grounds that "it is now and historically has been the general rule of practice to require a foreign plaintiff to give security for costs" (Outline Submissions, paragraph 28). Reliance was placed on Aeronave SPA v Westland ChartersWLR[1971] 1 WLR 1445. In addition, the Court was invited to take into account a number of discretionary factors, including the fact that (a) there was no high likelihood that the Plaintiff would succeed; (b) the Plaintiff was a hedge fund which (i) was likely to have a fluid asset...