Offshore Case Digest

Bermuda Supreme Court

Section 103 Of The Companies Act, 1981 - Shares - Compulsory Purchase - Minority Shareholder - Statutory Interpretation

MFP-2000, LP -v- (1) Viking Capital Limited (2) Misa Investments Limited [2014] SC (Bda) 6 Com (7 February 2014)

Ruling On Preliminary Point

Under section 103 of the Companies Act, 1981 ("the 1981 Act"), the holders of not less than 95% of the shares in a company can issue a notice ("a section 103 notice") to acquire the shares of the remaining shareholders on the terms set out in the notice, or, if any of the remaining shareholders applies to the Court, at a price to be set by the Court.

In this matter, the Respondents gave notice to the Applicant under Section 103(1) of their intention to acquire the Applicant's ordinary shares in Viking River Cruises Limited ("the Company") at a price specified in the notice. The notice was dated 29 September 2011 and the Respondents received it on 4 October 2011. The Respondents had the right to issue the notice because they held more than 95% of the ordinary shares in the Company. On 24 September 2012, the Respondents transferred all of their shares in the Company to a company called Viking Cruises Ltd ("VCL"). By an originating summons dated 28 October 2011, which was issued pursuant to Section 103(2), the Applicant applied to the Court to appraise the value of its shares. The point arising by way of preliminary issue is whether the Respondents, who no longer hold more than 95% of the ordinary shares in the Company, are still entitled under Section 103(2) to acquire the Applicant's shares at a price to be fixed by the Court. Justice Hellman noted that the Applicant's construction was the one which best fits the language of the text but, in considering the statutory context (i.e. that the dominant purpose of all these provisions is to facilitate corporate restructuring), the Respondents' construction of Section 103 is the one which best gives effect to that purpose. Justice Hellman found that there was no obvious commercial reason why a purchaser, having served a Section 103 notice, should be required to retain at least 95% of the shares before the appraisal process has been concluded. Conversely, it was noted that there is no economic prejudice to the minority shareholder if, at the date of appraisal or purchase, the purchaser no longer holds at least 95% of the shares or indeed any shares.

Justice Hellman thereby held that Section 103 provides a mechanism whereby the holders of not less than 95% of the shares in the company can purchase the shares of the minority. That means the holders of not less than 95% of the shares at the date when a Section 103 notice is given. The majority need not retain their shares until the minority shares have been acquired or the notice cancelled.

This decision is currently subject to an appeal.

February

The Bermuda International Conciliation And Arbitration Act, 1993 - Final Award - Enforcement - Public Policy

(1) HUAWEI TECH INVESTMENT CO. LTD. (2) HUAWEI INTERNATIONAL PTE LTD. -and- SAMPOERNA STRATEGIC HOLDINGS LIMITED [2014] SC (Bda) 8 Civ (14 February 2014)

Reasons For Decision

By Summons dated 4 October 2013, the Applicants applied for leave pursuant to Section 40(1) of the Bermuda International Conciliation and Arbitration Act, 1993 ("the Act") to enter judgment in terms of Consolidated Final Award made against the Respondent on 27 June 2013 and the Addendum made to it on 19 August 2013 in the Singapore International Arbitration Centre ("the Award"). As contemplated by the Act, the application was heard on an ex parte basis and Hellman J granted leave to enter judgment in terms of the Award, subject to the Respondents' right to apply within 14 days of service of the Order to set aside leave. Under the Award, the Respondent was ordered to pay the first Applicant nearly US$5 million plus costs and the second Applicant approximately US$13.5 million plus costs.

By Summons dated 14 November 2013, the Respondent applied to set aside the grant of leave on the following grounds: (i) the dispute deals with disputes not contemplated by and not falling within the submission to arbitrate; (ii) the Award contains decisions on matters beyond the scope of the submission to arbitrate; (iii) the Respondent was unable to present its case; and (iv) the enforcement of the Award would be contrary to public policy.

At the substantive hearing of the Respondent's Summons, the Chief Justice dismissed the application. The reasons for that decision have been outlined below and provide a useful reiteration of the approach of the Bermuda Court to the enforcement of arbitral awards.

The Bermudian courts have, on many occasions, stressed the strong public policy in favour of enforcing foreign arbitral awards, which is reflected in this legislative scheme. The leading Bermudian authority on enforcement of awards made in Convention countries is of some 25 years' vintage: the Court of Appeal for Bermuda decision in Soujuznefteexport -v- Joc Oil Ltd [1989] Bda LR 11. That decision outlined that the approach of the Bermuda Court, if there has been a Convention award under the New York Convention, is that there is a presumption that the tribunal acted within its power and that the award is valid and regular. Although this decision pre-dates the enactment of the 1993 Act, it was held that the quoted pronouncements on the policy approach to be adopted when dealing with an application for the enforcement of Convention Awards are binding on the Bermuda Court.

The Chief Justice noted that it appears to be settled under Bermuda law that enforcement cannot be refused on the grounds that the award contains matters "not submitted to arbitration" when the matters complained of (a) fall within the scope of the arbitration agreement, (b) are adjudicated under the contractually chosen governing law, and also (c) fall within the scope of the specific dispute referred to arbitration in question.

In respect of the public policy complaint, the Chief Justice found that the Respondent had not raised any seriously arguable foundation for declining to enforce the Award on public policy grounds. It was again perhaps unsurprising that the Respondent did not have the temerity to seek to pursue this ground of challenge to the decision of the Singaporean Tribunal before the Singaporean courts.

Third Party Notice - Joint Liability - Order 15 Rule 4(3) - Directions - Joinder

DENISE RIBAROFF -v- (1) BASIL WILLIAMS (2) CHRISTOPHER DILLON (3) JOHN ECKERT (4) ARUN PURI (5) JAMES WISE and FIDUCIARY PARTNERS TRUST COMPANY LIMITED (as Trustee of the Concordia Employee Benefit Trust) Third Party [2014] SC (Bda) 11 Civ (20 February 2014)

On 22 August 2013, the Plaintiff issued a Generally Endorsed Writ of Summons against the Defendants seeking damages estimated at approximately US$4.8 million for breach of a Sale and Purchase Agreement.

After entering an appearance on or about 12 September 2013, the Defendants issued a Third Party Notice against Fiduciary Partners Trust Company Limited ("Fiduciary"). This sought a contribution in respect of any damages which might become payable to the Plaintiff by the Defendants on the grounds that Fiduciary was jointly or jointly and severally liable under the sale and purchase agreement with the Defendants in respect of the relevant obligations.

After entering an appearance, the Fiduciary filed its Defence and Counterclaim to the Third Party Notice. In the interim, the Defendants issued a Summons seeking directions under Order 16 Rule 4 ("Third Party Directions"). Paragraph 4 of the Fiduciary's Defence admitted that the Third Party "owed joint or several obligations to the Plaintiff... as alleged in paragraph 2 of the Third Party Notice."

In this application, the Defendants sought an Order under Order 15 Rule 4(3) that the proceedings be stayed until the Fiduciary is joined as a Defendant on the grounds that there are causes of action relied upon by the Plaintiff, based on contractual obligations for which the Defendants and Fiduciary would be jointly, but not severally liable.

In summary, the Chief Justice held that the Defendants' Summons was liable to be dismissed provided that Fiduciary (the Third Party) undertook not to pursue the plea (outlined in its Defence and Counterclaim to Third Party Notice) that it can only be strictly liable if the Plaintiff joins it as a Defendant to the main action.

In giving judgment, it was noted that the English rule from which Order 15 Rule 4(3) is derived was revoked over 25 years ago and so no post-CPR persuasive authority exists which sheds light on the way in which the Court's powers under this rule should be exercised. The Chief Justice held that Order 15 Rule 4 (3) of the Rules of the Supreme Court confers on this Court the discretionary power to stay an action, on the application of a defendant, where the plaintiff refuses to join as a defendant a party not before the Court which is jointly liable with the defendant in respect of the claim before the Court. A defendant is not entitled to such relief as of right where the existence of a joint debt can be demonstrated. The exercise of the relevant discretion will be fact-sensitive and subject to the usual case management powers conferred by Order 1A of the rules.

The Chief Justice confirmed his hope that the present decision will enable similar joinder issues to be resolved more expeditiously and pragmatically in the future.

Winding-Up - Minority Oppression - Shareholder Disputes - S111 Companies Act, 1981

Allison Thomas and Ricardo Swan (Petitioners) -v- Fort Knox Bermuda Ltd. and Troy Symonds and Shari Poe [2014] SC (Bda) 15 Com (26 February 2014)

Minority oppression actions or shareholder disputes are relatively common in Bermuda but they rarely if ever go the full distance and end up in trial. In this case, the First Petitioner was a founder, shareholder, and former director of the First Respondent ("the Company")...