Griffin Line General Trading LLC v Centaur Ventures Ltd and anor
| Jurisdiction | Bermuda |
| Judgment Date | 31 March 2023 |
| Court | Supreme Court (Bermuda) |
| Docket Number | Civil Jurisdiction 2020 No 262 |
[2023] Bda LR 30
Civil Jurisdiction 2020 No 262
In The Supreme Court of Bermuda
Application for stay — Foreign proceedings dealing with the same subject matter — Principles to be applied
The following cases were referred to in the judgment:
Re Celestial Nutrifoods Ltd (in liquidation) [2017] Bda LR 11
Banca Intesa Sanpaola SpA v Commune di Venezia [2020] EWHC 3150
Athena Capital Fund SICAV-FIS SCA v Secretariat of State for the Holy See [2022] EWCA Civ 1051
Apex Fund Services Ltd v Clingerman [2020] Bda LR 12
Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2015] 1 WLR 2309
OAO CT-Mobile v IPOC International Growth Fund Ltd [2006] Bda LR 53
Mr M Diel and Mr D Williams for the Plaintiff
Mr D Duncan KC and Mr R Hawthorne for the 2nd Defendant
JUDGMENT of Hargun CJ
1. On 30 January 2023, following the Judgment of this Court dated 22 March 2022 (“the Judgment”), the Court heard two further applications on behalf of the Second Defendant, Templar Capital Ltd (“TCL”). The two applications are:
2. First, an application made by Summons dated 6 January 2023 whereby TCL seeks a case management direction that the Bermuda proceedings in this action be stayed pending the outcome of the South African proceedings commenced by the National Director of Public Prosecutions in South Africa (“the NDPP”) seeking to “preserve” TCL's claim against Optimum Coal Mine (Pty) (“OCM”), which originally was held by Centaur Ventures Ltd (“CVL”) (“the OCM Claim”). The OCM Claim was sold to TCL on 15 June 2020 and that sale is the subject of the present proceedings whereby Griffin Line General Trading LLC (“Griffin Line”) seeks an order and/or declaration that the sale and/or assignment of the OCM Claim to TCL be set aside pursuant to sections 36A to 36E of the Conveyancing Act 1983 on the basis that the sale was an undervalue disposition with the requisite intent. Griffin Line also seeks all such consequential directions as the Court thinks fit for restoring the position to what it would have been if the sale and/or assignment of the OCM Claim to TCL had not been entered into, thus protecting and/or restoring the interest and rights of Griffin Line.
3. Second, an application by TCL for leave to appeal the Judgment whereby the Court (i) allowed Griffin Line's application to vary the freezing order granted on 16 September 2020 (“the Freezing Order”); (ii) dismissed TCL's application for leave to implement the OCM Revised Business Rescue Plan (dated 11 September 2020) (“the Plan”) approved in the South African Business Rescue Proceedings on 28 September 2021; (iii) allowed TCL's application for an order amending the cross undertaking in damages given by Griffin Line in relation to the Freezing Order; (iv) dismissed TCL's application for fortification of that cross undertaking in damages; and (v) partially allowed TCL's application for security for costs.
4. The background facts are set out in the Judgment and are repeated here for ease of reference.
5. 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”).
6. 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.
7. CVL entered into coal trading contracts with OCM. OCM failed to deliver and ultimately owed CVL a debt of $74,577,285 million, which is the basis of the OCM Claim.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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”.
13. 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.”
14. 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.
15. 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.
16. 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”).
17. Nine (9) days after the Writ was filed, CGF filed a petition to wind up CVL dated 20 August 2020.
18. 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 $90,454,024.50. The article stated “The new business rescue plan proposes to convert its creditor claims against Optimum in the amount of about R1.3 billion into equity… The total equivalent value of Templar's debt to equity proposal is about R3.2 billion, excluding the capital required to bring the mind back into production.”
19. On 1 September 2020, Cox Hallett Wilkinson Limited acting as attorneys for Mr Deepak Raswant (as a former director of CVL and its 50% shareholder), wrote to Appleby (Bermuda) Limited and Wakefield Quin Limited, Bermuda attorneys acting for CVL, stating that Mr McGowan had disposed of the OCM Claim without Mr Raswant's approval, at a time when he was still a director of CVL in circumstances where Wakefield Quin had confirmed in an email of 8 August 2020 that CVL was “hopelessly insolvent”.
20. The statement by Wakefield Quin on 8 August 2020 that CVL was “hopelessly insolvent” so that it was liable to be wound up is to be contrasted with the sworn evidence of Mr McGowan to this Court by way of his First Affidavit in Civil Jurisdiction No 185 of 2020 (Griffin Line General Trading LLC v Centaur Ventures Ltd) where in paragraph 8 Mr McGowan advised the Court that “It is also CVL's position that it is not balance sheet insolvent as it has claims against all third parties involved which would be equal to or greater than the loan receivables and/or the amounts due to CVL creditors.” In taking this position Mr McGowan relied upon the draft management accounts of CVL as of February 2018 which stated that CVL's assets included coal pre-payment with OCM in the amount of US$ 74,577,792.
21. In its Judgment the Court expressed the view that 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...
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