Jardine Strategic Holdings Ltd
| Jurisdiction | Bermuda |
| Judge | Bell JA,Kay, JA,Clarke, P |
| Judgment Date | 24 March 2023 |
| Neutral Citation | BM 2023 CA 7 |
| Docket Number | Case No: Civ/2022/14-31 |
| Court | Court of Appeal (Bermuda) |
Neutral Citation Number: [2023] CA (Bda) 7 Civ
THE PRESIDENT, Sir Christopher Clarke
JUSTICE OF APPEAL Sir Maurice Kay
and
JUSTICE OF APPEAL Geoffrey Bell
Case No: Civ/2022/14-31
IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE SUPREME COURT OF BERMUDA SITTING IN ITS CIVIL
JURISDICTION (COMMERCIAL COURT)
BEFORE THE HON. CHIEF JUSTICE
CASE NUMBER 2021: No. 107, 108, 109, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 123, 124, 125 AND 126
Dame Lois Browne-Evans Building
Hamilton, Bermuda HM 12
Jonathan Crow KC and John Wasty of Appleby (Bermuda) Limited, for the Appellants
Mark Howard KC, Stephen Midwinter KC, Mark Chudleigh, Laura Williamson and David Thom of Kennedys Chudleigh Limited; Matthew Watson of Cox Hallett Wilkinson Limited, Delroy Duncan KC and Ryan Hawthorne of Trott & Duncan Limited, and Lilla Zuill of Harneys (Bermuda) Limited, for the Respondents
Hearing dates: 7–8 November 2022
This appeal concerns the right of a dissenting shareholder whose shares have been compulsorily acquired pursuant to section 106 of the Companies Act 1981 (“the Act”) to claim an entitlement to be paid such amount as may be appraised by the court on an application being made pursuant to section 106(6) of the Act, in circumstances where the shareholder in question had acquired his shares after either the initial announcement of the particular company's intention to propose an amalgamation or merger, or where such shareholder had not been a shareholder of the company when the company had given notice of the proposed amalgamation pursuant to section 106(2) of the Act.
The particular amalgamation in this case concerns Jardine Strategic Limited (“the Company”), which is a subsidiary company within the Jardine Matheson group of companies (“the Group”), of which the parent company is Jardine Matheson Holdings Limited (“Jardine Matheson”). The Company is the product of an amalgamation (“the Amalgamation”), between Jardine Strategic Holdings Limited (“Jardine Strategic”) and JMH Bermuda Limited (“JMH Bermuda”). Following amalgamation, those two companies continued as the Company. Prior to the Amalgamation Jardine Matheson held, directly or indirectly, 84.9% of the shares in Jardine Strategic.
The purpose of the transaction, according to the Company, was to simplify the structure of the Group. The planned simplification involved, first, the acquisition by Jardine Matheson, for cash, of the approximately 15% of the issued share capital of Jardine Strategic that it did not already own, and, secondly, the subsequent cancellation by Jardine Matheson of Jardine Strategic's almost 59% shareholding in it. These proceedings concern only the first step in the process.
On 8 March 2021, Jardine Strategic and Jardine Matheson announced (“the Announcement”) that the former had agreed with the latter's proposal for a recommended cash acquisition of the 15% of the former's share capital that the latter and its subsidiaries did not already own. The Announcement explained that the acquisition would be implemented by way of an amalgamation under the Act, that a general meeting of Jardine Strategic would be convened to consider and vote on the Amalgamation, and that shareholders in Jardine Strategic would be entitled to receive US$33 in cash for each ordinary share held, explaining how the acquisition price represented a premium of different percentages when compared with the share price on the Singapore Stock Exchange (one of the three exchanges on which the Company's shares were traded) over various recent periods.
The Announcement carried on to explain that because a number of the directors on Jardine Strategic's board were also directors of Jardine Matheson, Jardine Strategic had established a transaction committee comprising directors who were not also directors of Jardine Matheson. Finally, the Announcement pointed out that because the Amalgamation required the approval of at least 75% of the votes cast by shareholders in Jardine Strategic, and because Jardine Matheson had undertaken to Jardine Strategic that it would vote (and would procure that its subsidiaries would vote) in favour of the resolution, the requisite approval was certain to be secured.
On 17 March 2021, Jardine Strategic's board gave notice (“the Notice”) to its shareholders pursuant to section 106(2) of the Act of a special general meeting to be held on 12 April 2021 to consider and, if thought fit, pass a resolution approving the Amalgamation. The Notice confirmed that for the purposes of section 106(2)(b) of the Act the fair value of the shares had been determined by Jardine Strategic to be $33 per share.
In the period following the Announcement, and more particularly following the Notice, a number of funds acquired interests in Jardine Strategic's shares at an average price, according to the Company, of US$33.66.
At the meeting of 12 April 2021, the resolution approving the Amalgamation was passed. Then on 14 April 2021 the steps necessary to complete the Amalgamation having been effected, the Amalgamation became effective, and Jardine Strategic and JMH Bermuda continued as the Company.
Between 12 and 15 April 2021, eighteen originating summons were filed in relation to the Amalgamation, pursuant to which the plaintiffs in those proceedings (to whom I will refer generally as “the Dissenting Shareholders”) sought appraisals pursuant to section 106(6) of the Act, seeking to determine the fair value of their shares in Jardine Strategic. The Company defines those who bought shares after 17 March 2021 as Short-Term Shareholders, as compared to those claiming entirely in respect of shares held on or before 17 March 2021, whom they define as Long-Term Shareholders. There is in fact a third potential group, being those who held shares at the time of the Notice, and who subsequently bought more shares. The Dissenting Shareholders who are the Respondents to this appeal, which is taken by Jardine Strategic and the Company, used the definitions of Pre-Notice and Post-Notice Shareholders, arguably less pejorative, but since counsel on both sides and the judge tended to use Short-Term and Long-Term Shareholders, I shall use those terms.
Section 106 of the Act forms part of a section of the Act dealing with arrangements, reconstructions, amalgamations and mergers, and is the section dealing with shareholder approval for amalgamations and mergers. So far as material, it is in the following terms:
“(1) The directors of each amalgamating or merging company shall submit the amalgamation agreement or merger agreement for approval to a meeting of the holders of shares of the amalgamating or merging company of which they are directors and, subject to subsection (4), to the holders of each class of such shares.
(2) A notice of a meeting of shareholders complying with section 75 shall be sent in accordance with that section to each shareholder of each amalgamating or merging company, and shall—
(a) include or be accompanied by a copy or summary of the amalgamation agreement or merger agreement; and
(b) subject to subsection (2A), state—
(i) the fair value of the shares as determined by each amalgamating or merging company; and
(ii) that a dissenting shareholder is entitled to be paid the fair value of his shares.
…
(6) Any shareholder who did not vote in favour of the amalgamation or merger and who is not satisfied that he has been offered fair value for his shares may within one month of the giving of the notice referred to in subsection (2) apply to the Court to appraise the fair value of his shares”
Jardine Strategic and the Company then sought to strike out the appraisal claims of the Short-Term Shareholders, who had acquired shares with the knowledge that the Amalgamation was a foregone conclusion, and who acquired their shares as an arbitrage opportunity. The Company's position was that the proceedings taken by the Dissenting Shareholders had no real prospect of success, and accordingly were liable to be struck out. The amended summons included shareholders who held neither legal title nor a beneficial interest in the shares of Jardine Strategic, in recognition of the fact that many of the shares in Jardine Strategic had been acquired and were held through custodians or nominees.
The strike out applications were argued before the Chief Justice on 22 and 23 February 2022, and he delivered his judgment on 20 April 2022, in which he dismissed Jardine Strategic's and the Company's applications to strike out the proceedings. The Chief Justice defined the two companies as “the Company”. He set out the Company's case on the meaning of section 106 between paragraphs 23 and 40 of his judgment and that of the Dissenting Shareholders on the section between paragraphs 41 and 43, considering the object of section 106(6) of the Act, the language of section 106, its legislative history, the Company's construction regarding beneficial ownership, and the consequences of the Company's construction, before giving his conclusion at paragraph 87, rejecting the Company's case that only plaintiffs who were registered and/or beneficial shareholders as at 17 March 221 (the date on which the Notice was issued) could seek relief under the provisions of section 106(6) of the Act.
The Chief Justice then turned to the Company's argument that the Dissenting Shareholders' proceedings were an abuse of process, insofar as they were taken not in order to obtain relief from oppression, but with an intention to...
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