Corbin Erisa Opportunity Fund Ltd v Argo Group International Holdings, Inc.

• Jurisdiction: Bermuda
• Court: Supreme Court (Bermuda)
• Judge: Shade Subair Williams J
• Judgment Date: 03 December 2024
• Neutral Citation: [2024] SC Bda 69 civ
• Docket Number: 2023 No: 126 to 131

In the Matter of Argo Group International Holdings Inc. (formerly Argo Group International Holdings Ltd.)

And in the Matter of a Merger Agreement between Argo Group International Holdings Ltd., Brookfield Reinsurance Ltd., and Bnre Bermuda Merger Sub Ltd.

And in the Matter of Section 106 of the Companies Act 1981:

Between:

Corbin Erisa Opportunity Fund Ltd

Corbin Opportunity Fund LP

Fourworld Event Opportunities LP

Fourworld Global Opportunities Fund Ltd

Fourworld Special Opportunities Fund LLC

FW Deep Value Opportunities Fund I LLC

Plaintiffs

and

Argo Group International Holdings, Inc. (formerly Argo Group International Holdings, Ltd.)

Defendant

[2024] SC (Bda) 69 civ. (3 December 2024)

2023 No: 126 to 131

In The Supreme Court of Bermuda

Whether to grant a stay on case management grounds / Application for a stay pending unrelated proceedings of similar legal issues / Distinguishing cases involving separate sets of proceedings where the parties and factual and legal issues are substantially the same

Plaintiff: Mr. Delroy Duncan KC / Mr. Ryan Hawthorne ( Trott & Duncan Limited)

Defendant: Mr. Matthew Mason / Mr. Filip Nygren ( ASW Law Limited)

RULING

RULING of Shade Subair Williams J

Shade Subair Williams J

Introduction

1 This is the Defendant's application for a stay of these proceedings which were commenced by six separate originating summonses, all of which were filed on 19 April 2023.

2 The Plaintiffs' claim is brought under section 106(6) of the Companies Act 1981 (“CA 1981”). They seek declaratory and mandatory relief in pursuit of an Order sanctioning an appraisal of the fair value of their common shares in the Defendant (“Argo”) following a merger (the “merger”) between Argo and Brookfield Reinsurance Limited (“Brookfield”). Each of the Plaintiffs acquired these shares subsequent to Argo's issuance of a notice to its shareholders that a special general meeting would be held to approve the merger. The Plaintiffs voted against the resolution for approval of the merger. In that sense, the Plaintiffs have been termed “short-term shareholders”. In this Ruling I also refer to the Plaintiffs as the “Dissenters” of the “Dissenting Shareholders”.

3 The Defendant's stay application is made on a summons dated 25 January 2024 and is prayed in the following terms:

“ That these proceedings be stayed pending judgment of the Judicial Committee of the Privy Council in the matter captioned “in the matter of Jardine Strategic Holdings Limited Case No: Civ/2022/14–31….”

4 The summons is supported by affidavit evidence from Mr. Michael Tiliakos, the General Counsel and Secretary of Argo. The Plaintiffs filed affidavit evidence from Mr. Christopher Jaeger, a senior analyst at FourWorld Capital Management LLC.

5 The Defendant's position is that the originating summonses should be stayed pending the Privy Council's decision on appeal from Jardine Strategic Holdings Limited [2023] CA (Bda) 7 Civ (where the Court of Appeal upheld the decision of Hargun CJ on a strike out application on the issue of the short-term shareholders' standing in the context of an amalgamation). The company in Jardine Strategic Holdings Limited also filed an appeal from a second decision of the Court of Appeal on the issue of Jardine's dissenting shareholders' discovery entitlements. This will also be argued before the Judicial Board together with strike-out appeal. The underlying legal issues in this case and in Jardine Strategic Holdings Limited revolve around the issue of fair share value. The Defendant's application for a stay is grounded on an assertion that the Privy Council will resolve these shared legal issues and in so doing, it will have a dispositive effect on these unrelated proceedings.

6 Having heard oral arguments from Counsel for both sides, I reserved my ruling which I now provide together with these reasons.

Summary of the Background Facts

7 Argo, having formerly been incorporated in Bermuda, now operates as a Delaware incorporated company, effective 30 November 2023. Argo, through its regulated subsidiaries, is in the business of underwriting commercial specialty products in the US property and casualty market. Prior to the merger, its common shares were listed on the New York Stock Exchange (the “NYSE”). Those shares were delisted from the NYSE on 15 November 2023.

8 Brookfield is a Bermuda exempted insurance and reinsurance company. It has subsidiaries in the United States, Canada, Bermuda and in the Cayman Islands. Brookfield's shares, comprising Class A exchangeable shares and Class A-1 exchangeable non-voting shares are listed on the NYSE and the Toronto Stock Exchange.

9 Brookfield is the sole shareholder of its subsidiary BNRE Merger Sub Limited (“BNRE Merger Sub”), which is also a Bermuda exempted company. On 8 February 2023 Argo, Brookfield and BNRE Merger Sub entered into an Agreement and Plan of Merger (the “Merger Agreement”) which provided for (i) BNRE Merger Sub merging with and into Argo, the surviving company and (ii) Argo surviving the merger as a wholly owned subsidiary of Brookfield. The Merger Agreement was publicly announced on the same day as its formation.

10 The immediate effect of the merger resulted in each of Argo's issued and outstanding common shares being converted into certificates entitling the respective shareholder to receive US$30.00 per share (without interest and minus any required withholding tax) as consideration for the merger. The conversion meant that any such issued and outstanding common shares would be cancelled and delisted from the NYSE so that they would no longer exist.

11 The merger was to be put to a vote at a special general meeting to be held on 19 April 2023 (the “SGM”). Argos' common shareholders were put on notice of the SGM on 20 March 2023. Notice of the SGM, as issued by Argos' Board of Directors (the “Board”), also signaled that for the purpose of section 106(2) of the CA 1981 the US$30.00 sum had been determined to be the fair value of each of the unissued common shares.

12 After the issuance of the Board's notice of the SGM, on or about 6 April 2023, the Plaintiffs acquired their common shares of Argo, rendering themselves term short-term shareholders. Just short of two weeks thereafter, the merger resolution was approved at the SGM on 19 April 2023 by the requisite majority of the common shareholders. The Plaintiffs dissented from the majority of the shareholders on the passing of the merger resolution.

13 The Plaintiffs, comprising the full number of the short-term shareholders, commenced these proceedings on 19 April 2023. By agreement between the parties, the matter was stayed pending the completion of the merger which occurred on16 November 2023.

The Jardine Proceedings

14 Similar to the present case, the Jardine proceedings were commenced by short-term shareholders filing 18 separate originating summonses. Those plaintiff shareholders dissented on the passing of a resolution to approve an amalgamation agreement entered into by Jardine Strategic Holdings Limited (“Jardine”) on 17 March 2021.

15 Jardine sought to strike out those proceedings on the grounds that short-term shareholders had no standing to seek a fair value appraisal under section 106(6) of the CA 1981. The alternative basis for Jardine's strike-out application was that in seeking a fair share value appraisal, it amounted to an abuse of the Court's process. Jardine failed on this strike-out application. In the judgment of Hargun CJ (as he then was) in In the matter of Jardine Strategic Holdings Ltd [2022] SC (Bda) 27 Com (20 April 2022) (“ Jardine SC”), the Court held that the “character and motivations” of dissenting shareholders “as well as the timing and amount of their investments” did not factor as a relevant consideration to their standing or the Court's duty to carry out an objective assessment of the fair value of the shares.

16 Hargun CJ's decision was affirmed by the Bermuda Court of Appeal. Subsequently, Jardine obtained leave to appeal to the Privy Council.

Analysis and Discussion

17 The Defendant's stay application is made on case management grounds. It requires this Court to assess all of the relevant facts and circumstances before applying the law. In my examination of the relevant facts and circumstances, I am to carry out a balancing exercise between the benefits and prejudices which would be occasioned by an order of stay. This exercise engages the competing perspectives of both sides.

THE RELEVANT FACTS AND CIRCUMSTANCES

Whether the risk of prejudice to the Plaintiffs is removed by their receipt of payment of the merger consideration

18 Mr. Mason submitted that the Plaintiffs would not be prejudiced by a stay of these proceedings because they have already been paid the merger consideration totaling US$165,063,600.00 (in aggregate sum) representing the US$30.00 per common share value. To that extent, Mr. Mason pointed this Court to the legal position (post Shanda Games Ltd v Maso Capital Investments Ltd and others [2020] UKPC 2) in various other jurisdictions where it has been held that the deal price is the best indicator of fair value in appraisal proceedings.

19 Advancing a prediction that the Bermuda law position will shift towards a reliance on the deal price in determining the fair share value, Mr. Mason recited a portion of a speech publicly made by Lady Arden, Justice of the Supreme Court of the United Kingdom (and the Privy Council) in the 9 ^th Annual P.R.I.M.E. Financial Conference on 3 February 2020. Fair to say, Lady Arden's remarks were expressly neutral in her acknowledgment of the difficulties in determining the fair value of shares without reference to the merger price.

20 Mr. Mason, while devoted to his legal prognosis, submitted that it is unlikely that the Plaintiffs will ever receive more than what they were already paid, no matter how the Privy Council decides the...