Siddiqui and Ors v Athene Holding Ltd

• Jurisdiction: Bermuda
• Judge: Clarke P,Kay JA,Smellie JA
• Judgment Date: 20 September 2019
• Court: Court of Appeal (Bermuda)
• Docket Number: Civil Appeal Year No xx
• Date: 20 September 2019

[2019] Bda LR 74

In The Court of Appeal for Bermuda

Before:

Clarke P; Kay JA; Smellie JA

Civil Appeal Year No xx

Between:

Imran Siddiqui

Stephen Cernich

Caldera Holdings Ltd

Appellants

and

Athene Holding Limited

Respondent

Mr A Potts QC for the Appellants

Mr K Taylor and Mr B McCosker for the Respondent

The following cases were referred to in the judgment:

Sino-JP Fund Company Ltd v Pacific Electric Wire & Cable Co Ltd [2006] Bda LR 51

Universal Reinsurance Co Ltd v Holden & Co Inc [2006] Bda LR 26

National Iranian Oil Co v Ashland Overseas Trading Ltd [1987] Bda LR 64

Nilon Ltd v Royal Investments SA [2015] UKPC 2

Livingston Properties Equities In v JSC MCC Eurochem BVIHCMAP2016/0042-0046

Arabian American Insurance Co (Bahrain) EC v Al Amana Insurance & Reinsurance Co Ltd [1994] Bda LR 27

Altimo Holdings v Kyrigyz Mobil Tel Ltd [2012] 1 WLR 1804

Recovery Partners v Rukhadze & Ors [2018] EWHC 2918

Ocular Sciences Ltd v Aspect Vision Care [1997] RPC 289

Vestergaard Frandsen AS v Bestnet Europe Ltd [2013] UKSC 11

Joliet 2010 v Goji Ltd [2012] Bda LR 76

Petroleo Brasilliero SA Mellitus Shipping Inc (“The Baltic Flame”) [2001] 1 All ER (Comm) 993

Base Metal Trading v Shamurin [2005] 1 WLR 1157

Globalink Telecommunications Ltd v Wilmbury [2003] 1 BCLC 154

Peiris v Daniels [2015] Bda LR 16

Antec International Ltd v Biosafety USA Inc [2006] EWHC 47

Prest v Petrodel Resources Ltd [2013] UKSC 34

Gilford Motor Co Ltd v Horne [1933] Ch 935

Gencor ACP Ltd v Dalby [2000] 2 BCLC 734

Breach of fiduciary duties by directors — Confidential information — Whether case should be struck out on case management grounds — No reasonable cause of action — Leave to serve out of the jurisdiction — Forum conveniens

JUDGMENT of Clarke P

Introduction

1. This consolidated appeal is against two rulings. The first is the ruling of Hellman J of 28 June 2018, whereby he dismissed the application of Caldera Holdings Ltd, a Bermuda company (“Caldera”), the third defendant, to stay the action against it on forum conveniens grounds. Caldera seeks leave to appeal that decision and, if leave is given, it seeks an order allowing the appeal and imposing the stay sought.

2. The second is the ruling of Chief Justice Hargun dated 14 January 2019, whereby:

• i. He refused to strike out the writ or summarily to dismiss it on the grounds that:

  • (a) it failed to disclose a reasonable cause of action against Caldera;

  • (b) the claim asserted against Caldera was frivolous or embarrassing for want of particularity; and

  • (c) the proceedings were an abuse of the process of the Court; and

• ii. He gave Athene leave to serve the Statement of Claim out of the jurisdiction.

• iii. He refused Caldera's application for leave to appeal the Ruling of Hellman J of 28 June 2018.

The Chief Justice gave leave to the appellants to appeal from the whole of his Ruling.

The Facts

3. The facts of the case are of some complexity and have been set out at length in the judgments below; and it is necessary to record them herein for the purposes of determining the appeal. I shall endeavour to confine recitation of them to that which is necessary for that purpose.

4. Athene Holding Ltd (“Athene”) is an exempt Bermuda company. It was formed in 2009. It has what is said to be a “strategic relationship” with Apollo Global Management LLC (“Apollo”), a Delaware corporation, which is a publicly traded corporation, with a myriad of subsidiaries. The Apollo Group of companies is a huge entity with many billions of assets under its control. Athene Asset Management LP (“AAM”), an indirect subsidiary of Apollo, is Athene's investment manager. The Apollo Group has about 10% of the shares of Athene and controls 45% of the voting power. As at 31 December 2017 five out of twelve of Athene's Directors were employees or consultants of Apollo1. These presently include (since 2009) Mr James Belardi (“Mr Belardi”), who is Athene's Chairman, Chief Executive Officer and Chief Investment Officer, and a dual employee of both Athene and AAM.

5. Athene has since December 2016 been registered on the New York Stock Exchange. Prior to that it was owned by Alternative Asset Management, an affiliate of Apollo.

6. Athene describes itself (in its 2017 annual filing with the US Securities and Exchange Commission) as “a leading retirement services company that issues, reinsures and acquires retirement savings products designed for the increasing number of individuals and institutions seeking to fund retirement needs”. According to that filing, Athene is based in Bermuda with its US subsidiaries' headquarters being located in Iowa.

7. The principal savings products are annuity contracts, of which it is now said to be one of the world's largest providers. It buys blocks of annuity contracts, which guarantee policy holders an income for life in exchange for a lump sum, and invests the assets tied to those contracts with the aim of generating a greater return than is necessary to make payments to annuity holders.

8. As of 1 January 2018 Athene, and its subsidiaries (its primary subsidiaries being insurance and reinsurance companies) had about 1,125 employees located in Bermuda and the United States. It had subsidiaries licensed to carry on insurance business in all 50 States of the Union and the District of Columbia. The subsidiaries were organised and domiciled in either Delaware, Iowa or New York.

9. Athene was intended to operate in a manner that would not cause it to be treated as being engaged in a trade or business within the United States or subject to US federal income tax on its net income. It was a holding company with limited operations of its own. Its insurance and reinsurances subsidiaries owned substantially all of its assets and conducted substantially all of its operations.

10. In Bermuda Athene had, at 31 December 2017, a (leased) office with 24 non-Bermudians working there (other than spouses of Bermudians, holders of permanent

residents' certificates, and holders of working residents' certificates). Mr Belardi's evidence was that Athene had a real and significant presence “on the ground” in Bermuda and that the vast majority of its board decision-making occurred in Bermuda with the vast majority of its board meetings and official executive committee meetings being held there. The AGM of shareholders takes place in Bermuda. None of its directors reside in Bermuda.

Mr Siddiqui

11. Imran Siddiqui (“Mr Siddiqui”), the first defendant, lives in New York. He joined Apollo in 2008. He was, according to the Statement of Claim in the Second JAMS arbitration, dated 3 May 2018 (i) senior partner of Apollo, (ii) a principal of Apollo Management LP2, (iii) a Limited Partner of Apollo Advisers VIII LP3 and (iv) served on the Board of Athene. He was not an employee of Athene. On or about 16 July 2009 he was appointed as an Apollo nominated director of Athene. He is said to have served, in effect, as the lead director in significant aspects of Athene's business, in particular including overall strategic direction, financial underwriting and identification, pricing and execution of strategic transactions: Amended Statement of Claim (“ASOC”) [7].

12. Mr Siddiqui's evidence was that almost all of his work for Athene was performed in his capacity as a director of Athene and a partner and employee of Apollo, and almost all of it was carried out in the State of New York where Apollo was domiciled. According to Mr Siddiqui Athene maintained offices in New York and Iowa. He operated out of Apollo's New York office. He said that the day to day operations of Athene, including the vast majority of the business decisions and business activities took place by way of its officers carrying out their functions in the US. All the officers identified on its website lived in the US.

13. However, as Hellman J recorded, Mr Belardi noted that from 2012 until Mr Siddiqui resigned as a director of Athene, Mr Siddiqui travelled to Bermuda 20 times for Athene's board meetings. According to him Athene does not lease or own any office in the US; although some of its US subsidiaries had US offices.

Mr Cernich

14. Stephen Cernich (“Mr Cernich”), the second defendant, is a US citizen, resident in Kentucky. He joined Athene in June 2009. According to a separation agreement dated October 20 2016, he was employed by Athene Annuity and Life Company and its affiliates including Athene and AAM. He was employed in various positions including Chief Actuary and Executive VP, Corporate Development. In the latter role he is said to have been responsible for determining Athene's reserving practices and modelling, including with respect to potential acquisition targets: ASOC [8]. There is an issue as to whether Mr Cernich is to be regarded as an officer, as Mr Belardi describes him to be. In an action brought by him in Delaware against Athene he describes himself as having been an officer and there is plainly a seriously arguable case that he was.4

15. In his evidence Mr Cernich said that he believed that during his tenure with Athene the majority of strategic and other “decision-making efforts” took place at meetings in New York, Iowa and Los Angeles, and not Bermuda. These meetings often involved representatives of Apollo. Athene's principals maintained assigned office space in the US for which Athene reimbursed its subsidiaries.

16. Mr Belardi noted that from 2012 until Mr Cernich left Athene, Mr Cernich travelled to Bermuda 14 times for Athene's board meetings. Mr Cernich drew a distinction between board meetings and management meetings, the latter of which took place in the US.

Company A

17. According to the ASOC, from 2009 onwards Athene has had plans to acquire a company which has been described as “Company A”. Mr Siddiqui and Mr Cernich prepared, assessed and managed Athene's plans for the acquisition of that company. Until they left their engagements with Athene and...