Glendina Pty Ltd & Others (as set out in Schedule One attached to the Originating Summons) v NKWE Platinum Ltd
| Jurisdiction | Bermuda |
| Judge | Hargun CJ |
| Judgment Date | 31 March 2022 |
| Court | Supreme Court (Bermuda) |
| Docket Number | CIVIL JURISDICTION COMMERCIAL COURT 2018: No. 347 |
[2022] SC (Bda) 22 Com (31 March 2022)
Hon. Chief Justice Hargun
CIVIL JURISDICTION COMMERCIAL COURT 2018: No. 347
In the Supreme Court of Bermuda
Ms Hannah Tildesley, Ms Luisa Olander of Appleby (Bermuda) Limited, for the Plaintiff
Mr Jonathan O'Mahony of Conyers Dill & Pearman Limited, for the Defendant
Application for general discovery against dissenting shareholders in relation to an appraisal action under section 106 Companies Act 1981section 106 Companies Act 1981; relevant principles to be applied; application for additional security for costs; relevant principles to be applied
By the Originating Summons, the Plaintiff minority shareholders (“ the Dissenting Shareholders”) seek the determination pursuant to section 106(6) Companies Act 1981 of the fair value of shares that they held in NKWE Platinum Limited (“ the Company”) before it underwent amalgamation. The Dissenting Shareholders number 456 companies and individuals.
There are two applications by the Company: one for discovery from the Dissenting Shareholders and the other for additional security for costs.
The Company has issued summons seeking an order that the Dissenting Shareholders either (i) provide discovery by list pursuant to Order 24 rule 2 or (ii) provide an Affidavit verifying that they have no documents which are or have been in their possession custody or power relating to any matter in question between them (“ Discovery Summons”). The Discovery Summons is supported by (i) the First Affidavit of Jonathan O'Mahony (“ O'Mahony 1”) and exhibit JOM-1 dated 17 June 2020, (ii) the Second Affidavit of Zhiyu Fan (“ Fan 2”) and exhibit ZF2 dated 20 October 2020 and (iii) the Fourth Affidavit of Zhiyu Fan (“ Fan 4”) dated 4 May 2021 and exhibit ZF4 (the Discovery Summons and supporting affidavits together: “ the Discovery Application”); (b) The Plaintiffs' response to the Discovery Application is set out in the Second Affidavit of Luke Matthews dated 9 December 2020 (“ Matthews 2”) and exhibit LDM2.
The Company has also issued summons seeking security for costs and is supported by the Third Affidavit of Zhiyu Fan dated 19 March 2021 (“ Fan 3”) and exhibit ZF3 (together: “ the Security Application”). The Dissenting Shareholders' response to the Security Application is set out in the Third Affidavit of Luke Matthews dated 20 September 2021 (“ Matthews 3”) and exhibit LDM3.
The background to these proceedings is helpfully set out in the skeleton argument of both parties and is uncontroversial.
The Company is a Bermuda registered company and is predominantly engaged in the exploration and development of a platinum group metals (“ PGM”) project in South Africa (namely, platinum, palladium, osmium, ruthenium, iridium and rhodium). The Company's primary asset is its 74% interest in the mining rights of the Garatau Project located in the Bushveld Complex in South Africa which holds the world's largest PGM reserves.
The Dissenting Shareholders held between them 197,006,422 of the shares in the Company which amounted to over 20% of the Company's share capital.
On 19 March 2018 the Company announced to the Australia Stock Exchange (“ ASX”) (where the Company was listed at the time) that the Company's largest shareholder, Zijin Mining Group Co. Limited (“ Zijin”), had made an indicative offer to acquire the shares in the Company which it did not already own at a price of Australian Dollars ( A$) A$0.08 per share via an amalgamation under Bermuda law. Zijin, through its wholly owned subsidiary Jin Jiang Mining Limited (Jin Jiang), controlled, at that time, 60.47% of the shares in the Company. On 16 August 2018, the Company informed the ASX that an agreement had been reached with Zijin for Zijin to acquire 100% of NKP's issued capital via an amalgamation (Amalgamation). Under the Amalgamation shareholders would receive cash consideration of A$0.10 per share (“ Zijin Offer”).
The amalgamation agreement is between the Company, Zijin and Zijin's wholly owned subsidiaries Gold Mountains (Bermuda) Investment Limited (“ BidCo”) and Gold Mountains (HK) International Mining Limited (“ Gold Mountains”) pursuant to which the Company amalgamated with BidCo and 100% of the Company's issued and outstanding share capital was cancelled. The resulting amalgamated company is wholly owned by Gold Mountains, is controlled by Zijin, and is the Defendant in these proceedings.
On 11 October 2018, the Dissenting Shareholders launched the present Proceedings, applying under section 106(6) of the Companies Act 1981 for a Court appraisal of the fair value of the Company's shares.
In addition, the Dissenting Shareholders engaged SRK Consulting in Johannesburg (“ SRK”) to consider and opine on the Company's fairness opinion on the fair value of the Company shares. SRK produced an independent expert report dated 10 October 2018 which provided a range for valuation with a mid-point of A$0.192 and a high point of A$0.263 per share.
In a letter dated 18 March 2019, the Company informed the ASX that the Amalgamation became effective on 14 March 2019. The March 2019 announcements to the ASX contained indicative timetables for the Amalgamation and, specifically, the Company's intended course of action with regard to the cancellation of shares and the payment of A$0.10 per share to shareholders (“ Amalgamation Consideration”).
The Amalgamation Consideration was not paid to the Dissenting Shareholders on completion of the Amalgamation and the Dissenting Shareholders began proceedings in respect of the non-payment of the Amalgamation Consideration by Originating Summons filed on 28 March 2019 (Claim No. 101 of 2019). These 2019 proceedings were compromised by the Company agreeing to pay the Amalgamation Consideration. Subsequently, A$19,700,642.20 was paid to Bowen Buchbinder Vilensky (“ BBV”), the Plaintiffs' Australian Attorneys.
The background to the Discovery Application is that by Consent Order dated 5 March 2020 (“ Consent Order”) the parties agreed to directions for trial and discovery. At Paragraph 1 of the Consent Order, it was agreed that discovery was only required from the Company and no order was made for discovery from any of the Plaintiffs:
“There shall be discovery by the Defendant of all documents which are or have been in its possession, custody or power relating to the matters in question in the action by the serving on the Plaintiffs a List of Documents together with electronic copies of those documents on or before 4pm on 6 April 2020”
By Summons dated 30 September 2020 the Company seeks an order that the Dissenting Shareholders provide discovery by list pursuant to Order 24 rule 2 or provide affidavit verifying that they had no documents which are or have been in their possession custody or power relating to any matter in question between them in the action.
Mr O'Mahony, for the Company, relies upon the decision of Rix JA in Qunar Cayman Islands v Athos Asia Event Driven Master Fund [2018] (1) CILR 199 (Cayman Court of Appeal) and submits that:
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(1) Discovery in dissenting shareholders valuation cases is a mutual obligation and there is a requirement to provide general discovery but limited to those documents relevant to a fair value appraisal.
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(2) Accordingly, it is clear that dissenting shareholders are required to undertake the exercise of searching for relevant discoverable documents.
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(3) There is no distinction drawn between the “ sophisticated” and the “ unsophisticated” dissenting shareholder as to whether or not the exercise of searching for relevant discoverable documents is required to take place. In any event drawing such a distinction would be difficult and establish a dangerous precedent.
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(4) The categories of documents that might be relevant are not closed and they can include documents, reports, analysis, projections and so on about companies in which they invest, their products, their industries, their markets, their competitors, in other words documents or material which relates to the value of such companies.
The Company justifies its application that the Dissenting Shareholders be required to give a general discovery on the following grounds:
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(1) The rules require the parties to provide discovery (paragraph 16 (iii) of O'Mahony 1).
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(2) If the Dissenting Shareholders do not give discovery it would potentially cause the Company a real injustice (paragraph 16(vi) of O'Mahony 1).
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(3) The Company may have destroyed, or lost documents and the Dissenting Shareholders may have retained copies of those destroyed or lost documents (Conyers letter of 9 July 2020).
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(4) The Company understands that the Dissenting Shareholders (or some of them) may hold material which they may have obtained from the Company outside the context of regular communications to all shareholders as a class (Conyers letter of 9 July 2020).
Ms Tildesley, for the Dissenting Shareholders, submits that the Dissenting Shareholders are highly unlikely to hold any documents relevant to the Proceedings:
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(1) They are not sophisticated investors like the hedge funds frequently seen in Cayman Islands appraisal litigation. They were not undertaking Company valuation exercises with the benefit of experts and valuation committees in order to determine if there was an arbitrage opportunity in purchasing the Company's shares ahead of the amalgamation.
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(2) They are outsiders to the Company and obtained information about the Company only from the Company itself or pursuant to public filings the Company was obliged to make. The Company itself accepts that the shareholders are outsiders to the Company (save for three individuals...
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