Griffin Line General Trading Llc v Centaur Ventures Ltd
| Jurisdiction | Bermuda |
| Judge | Hargun CJ |
| Judgment Date | 22 March 2022 |
| Court | Supreme Court (Bermuda) |
| Docket Number | 2020: No. 262 |
[2022] SC (Bda) 15 Civ
Hon. Chief Justice Hargun
2020: No. 262
In The Supreme Court of Bermuda
CIVIL JURISDICTION
Application for fortification of undertaking as to damages; principles to be applied; security for costs on ground that the plaintiff is outside the jurisdiction
Mr. Mark Diel and Mr. Dantae Williams, Marshall Diel & Myers Limited, for the Plaintiff
Mr Delroy Duncan QC and Mr Ryan Hawthorne of Trott & Duncan for the 2 nd Defendant
Following the Judgment of this Court dated 2 August 2021, the Court heard four applications on 15 February 2022. The four applications are:
First, the adjourned application on behalf of the Plaintiff, Griffin Line General Trading LLC ( “Griffin Line”) to prohibit Templar Capital Ltd ( “TCL”) to amend the injunction granted by Subair Williams J on 16 September 2020 (the “Freezing Order”) and to prohibit TCL from taking steps to advance and/or implement the Revised Business Rescue Plan (dated 11 September 2020) (the “Plan”) approved in the South African Business Rescue Proceedings (on 28 September 2021) concerning Optimum Coal Mine (Pty) (“OCM”).
Second, an application on behalf of TCL to vary the Freezing Order to allow TCL to implement the Plan.
Third, an application on behalf of TCL for an order to amend the undertaking given by Griffin Line in relation to the Freezing Order and an order that Griffin Line provide fortification for the undertaking by payment of US$23,586,000, failing which the Freezing Order should be discharged.
Fourth, an application by TCL for an order that Griffin Line pay security for costs in the amount of US$1,535,399.
The background to these proceedings is set out in the earlier Rulings and Judgments relating to Griffin Line and Centaur Ventures Ltd ( “CVL”) and in particular the Judgment of this Court dated 2 August 2021 at [4] to [15]. In considering these applications the Court bears in mind that this is not an ordinary commercial dispute between parties to a freely negotiated contract. In essence, these proceedings relate to a claim by Griffin Line that the CVL's sale and assignment of the OCM Claim (defined below) to TCL under an agreement dated 15 June 2020 should be set aside pursuant to sections 36A to 36E of the Conveyancing Act 1983 on the ground that the sale and assignment of the OCM Claim was a disposition of property made with the requisite intention and at an undervalue and is voidable at the instance of an eligible creditor in the position of Griffin Line. The background facts are essential to the determination of these applications and are helpfully set out in the written submissions on behalf of Griffin Line which the Court considers to be accurate.
Griffin Line loaned money to CVL pursuant to two loan facility agreements respectively dated 15 February 2016 and 7 November 2016 (together the “Facility Agreements”).
CVL repaid portions of the sum owing to Griffin Line under the Facility Agreements but the sum of $104,127,604.72 remains outstanding with interest continuing to accrue at the rate of 4% per annum.
CVL entered into coal trading contracts with OCM. OCM failed to deliver and ultimately owed CVL a debt of $74,577,285 million (the “OCM Claim”).
OCM entered into Business Rescue Proceedings in South Africa in February 2018. CVL suspended its own trading activities in February 2018 and directed its efforts to the recovery of the OCM Claim.
On 31 March 2020, CVL entered into an agreement to sell the OCM Claim to LURCO Group South Africa Proprietary Limited (“Lurco”) for $73,359,323.46 (the “Lurco Agreement”). This agreement lapsed on or around 8 May 2020.
45 Days after the Lurco Agreement fell through CVL signed a cession agreement between itself and TCL, an affiliated company, on 15 June 2020 where CVL sold and/or assigned its interest, rights, options, and/or claims in and over OCM to TCL (the “TCL Agreement”). CVL knew at the time of the TCL Agreement that it was unable to repay the outstanding amounts owed to Griffin Line under the Facility Agreements. Additionally, CVL knew that the only significant asset it held to repay Griffin Line was the OCM Claim. Although CVL had an offer to purchase the OCM Claim for USD$73,539,323.46 in April 2020, forty-five (45) days later CVL sold the same OCM Claim for approximately USD$11.9 million or 17% of the Lurco offer. The TCL Agreement was executed by Mr McGowan for CVL and Mr McGowan for TCL as its sole director and shareholder. The payment arrangement for the TCL Agreement was a five-year low interest loan.
On 22 June 2020 Griffin Line was granted a Freezing Injunction restraining CVL from disposing of or dissipating the proceeds of sale to be received by CVL from the sale of the OCM Claim. This injunction was premised on the sale of the OCM Claim to Lurco. However, unknown to Griffin Line, at the time of the Freezing Injunction, the OCM Claim had been sold by Mr McGowan as the principal of CVL to his own company, TCL.
CVL applied to discharge the CVL Freezing Injunction but was unsuccessful for the reasons set out in the Judgment dated 24 July 2020. In relation to the application to set aside the ex parte injunction Mr McGowan filed on behalf of CVL, an affidavit dated 2 July 2020 in which he volunteered that “ on 15 June 2020 CVL disposed of its creditor claim in OCM on an arm's-length commercial basis.” No details were given as to the identity of the purchaser or in relation to the price paid or any other terms which could allow Griffin Line or the Court to objectively verify that the disposal of the OCM Claim was indeed “ on an arm's-length commercial basis”.
When requested to identify the purchaser of the OCM Claim Mr McGowan refused to do so. In his subsequent affidavit sworn on 9 July 2020 Mr McGowan explained that CVL had voluntarily disclosed this information and explained that CVL “ had no obligation to do this, nor to identify the party who acquired the claim. These commercial matters are private and confidential to CVL and are not matters of which [Griffin Line] or any of CVL's other creditors are entitled to do.
In the 24 July 2020 Judgment the Court expressed its concern at the reluctance of Mr McGowan and his legal advisers to disclose the identity of the valuer and the details of the consideration for which the OCM Claim had been disposed of. The Court expressed the view that in light of the alleged disposal of the OCM Claim to a company wholly owned by Mr McGowan; the manner in which the disposal was disclosed; and the refusal to provide the necessary information so that the disposal can be examined on an objective basis, there was “ real risk” of a dissipation of assets. In those circumstances the Court ordered that the injunction granted on 22 June 2020 should not be discharged.
Three days after the failed set-aside application on 13 July 2020, Centaur Group Finance Ltd ( “CGF”), an associated company of CVL, whose sole registered director is Mr McGowan, served a statutory demand on CVL relating to the repayment of various alleged intercompany loans (the “Statutory Demand”).
Griffin Line filed a Generally Endorsed Writ of Summons in the Supreme Court of Bermuda on 11 August 2020 seeking, inter alia, to set aside the TCL Agreement and the assignment and/or sale of the OCM Claim from CVL to TCL (the “Writ”).
Nine (9) days after the Writ was filed, CGF filed a petition to wind up CVL dated 20 August 2020.
On 24 August 2020, Mining Weekly published an article, including quotes from Mr McGowan that TCL was proposing to convert the OCM Claim into R1.3 billion of equity in NewCo, Griffin Line states that R1.3 billion equates to approximately $90,454,024.50. The article stated “ The new business rescue plan proposes to convert its creditor claims against Optimum in the amount of about R1.3 billion into equity… The total equivalent value of Templar's debt to equity proposal is about R3.2 billion, excluding the capital required to bring the mind back into production.”
On 1 September 2020, Cox Hallett Wilkinson Limited acting as attorneys for Mr Deepak Raswant (as a former director of CVL and its 50% shareholder), wrote to Appleby (Bermuda) Limited and Wakefield Quin Limited, Bermuda attorneys acting for CVL, stating that Mr McGowan had disposed of the OCM Claim without Mr Raswant's approval, at a time when he was still a director of CVL in circumstances where Wakefield Quin had confirmed in an email of 8 August 2020 that CVL was “ hopelessly insolvent”. The statement by Wakefield Quin on 8 August 2020 that CVL was “ hopelessly insolvent” so that it was liable to be wound up is to be contrasted with the sworn evidence of Mr McGowan to this Court by way of his First Affidavit in Civil Jurisdiction No 185 of 2020 ( Griffin Line General Trading LLC v Centaur Ventures Ltd) where in paragraph 8 Mr McGowan advised the Court that “ It is also CVL's position that it is not balance sheet insolvent as it has claims against all third parties involved which would be equal to or greater than the loan receivables and/or the amounts due to CVL creditors.” In taking this position Mr McGowan relied upon the draft management accounts of CVL as of February 2018 which stated that CVL's assets included coal pre-payment with OCM in the amount of US$ 74,577,792.
The background facts outlined above demonstrate to this Court that Griffin Line is fully justified in its concern that unless this Court takes all the measures which are available to it there is a serious risk that Mr McGowan and the corporate entities controlled by him will make it impossible for Griffin Line (or CVL) to have any recourse to the OCM Claim (or its replacement assets) in the event Griffin Line is...
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