Richard Scott Tucker as Joint and Several Administrator of Vector Resources Ltd (Administrators Appointed) v Mongbwalu Goldfields Investment Holdings 6 Ltd
| Jurisdiction | British Virgin Islands |
| Judge | Wallbank J |
| Judgment Date | 11 November 2021 |
| Judgment citation (vLex) | [2021] ECSC J1111-2 |
| Docket Number | CLAIM NO. BVIHCM 2021/0047 |
| Court | High Court (British Virgin Islands) |
EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
COMMERCIAL DIVISION
CLAIM NO. BVIHCM 2021/0047
CLAIM NO. BVIHCM 2021/0048
Mr. Alex Hall Taylor, QC, with him Ms. Amelia Tan for the Applicants
Mr. Richard Fisher, QC, with him Mr. Shane Donovan for the Respondent Mongbwalu Goldfields Investment Ltd
Wallbank J (Ag.): This is the Court's judgment in respect of two applications filed on behalf of Vector Resources Limited (‘ Vector’) by its joint administrators. These applications are
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(1) An application for this Court's assistance (the ‘ Assistance Application’) for an order under section 467(3)(b) and/or 3(h) of the Insolvency Act 2003 1 (the ‘ Act’) that, during the administration of Vector in Australia, Mongbwalu Goldfields Investment Holdings 6 Limited (‘ MGIH6’) and Harneys Corporate Services Limited (‘ HCSL’) be restrained from taking any steps to effect a transfer of 69.5% of the shares in MGIH6 held in the name of Vector (‘ the Shares’) to Mongbwalu Goldfields Investment Ltd (‘ MGI’); and
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(2) An application for the appointment of ‘soft touch’ provisional liquidators over itself under section 170 of the Act, and an order under section 170(5) and/or 171(1) restraining MGIH6 and HCSL from taking any steps to effect the transfer of the Shares to MGI (‘the Provisional Liquidation Application’).
For the reasons set out below, both applications fail. In reaching this judgment, I am conscious that this is likely to have very significant negative consequences for Vector, its creditors, and very possibly for the livelihoods of those behind Vector. I have not reached this decision lightly.
The underlying matrix of fact and procedural history can be quite briefly stated.
In the Democratic Republic of Congo there is a tract of land believed to contain gold deposits. Steps have been afoot to convert this opportunity into money and with the eventual sinking of a commercial mine to extract the gold for profit. This can for convenience be referred to as ‘ the Project’. MGIH6, through a majority-owned subsidiary, Adidi Kanga Resources SA, holds an interest in the Project. For present purposes the nature and extent of that interest is irrelevant.
It suffices to posit for present purposes that this interest was enough for MGIH6 to have sufficient control of the Project. MGIH6 itself is owned by MGIMGI itself has not been in a position to concretize the establishment of a mine. That is where Vector came in. Vector is a corporate entity incorporated and originally publicly listed in Australia. Its essence appears to have been to act as a channel through which investors interested in investing in potentially lucrative mining projects such as this one can invest their money, hopefully for a return on investment.
On 10 th July 2018 MGI and Vector entered into a Share Sale and Purchase Agreement (‘ SSPA’) pursuant to which MGI agreed to sell 69.5% of the issued share capital of MGIH6 (‘ the Shares’) to Vector for $90 million. MGIH6 is a company incorporated in this jurisdiction (the ‘ BVI’). The SSPA was expressly governed by English law.
As one would expect, the deal between MGI and Vector was more complicated than a normal commercial sale and purchase transaction where the shares in a land-owning company change hands for an agreed sum of money on a single date. Some of the factors which made this transaction more complicated included that the feasibility of establishing a commercial mine had yet to be ascertained and Vector itself would need to raise money from third party investors to consummate the purchase. As it goes without saying, Vector's ability to raise money in the market would inevitably depend upon being able to show investors that it was the legal owner of the majority of the shares in the company that controls the Project. Furthermore, Vector itself would need time to raise the necessary funds, so there was always uncertainty whether Vector would indeed be able to consummate the sale and purchase.
So, the part of the bargain which concerns us presently was structured like this. Vector was to pay a first tranche of US$5 million towards the purchase price by a certain date, and then a second tranche of US$5 million by a further date, and then, by a yet further date, Vector was to make a credit facility available for use of the Project in an amount of not less than US$10 million (the ‘ Shareholder Loan Facility’). In the meantime, the Shares would legally be transferred to Vector. But Vector would not by that time have paid the full purchase price of US$90 million, so Vector and MGI agreed a mechanism whereby the Shares could be legally transferred back to MGI in case Vector should default upon its payment and other contractual obligations. Such other obligations included completing a definitive feasibility study (the ‘ Definitive Feasibility Study’) by a certain date. The agreed mechanism was that the Shares would be held by an independent escrow agent in this jurisdiction, together with paperwork which would enable and indeed require the escrow agent immediately to transfer the Shares back to MGI if the escrow agent was instructed by MGI to do so in the event of a material default by Vector. All that might be needed to complete the paperwork to release the Shares back to MGI was for the retransfer date to be inserted, where or if that had been left blank. The escrow arrangement was covered by its own escrow agreement. It provided for the possibility of the escrow agent not immediately releasing the retransfer paperwork in the event of uncertainty whether or not the retransfer had properly been triggered. The escrow agent was HCSL, which is based in this jurisdiction. The escrow agreement was entered into on 3 rd September 2018 between MGI, MGIH6, Vector and HCSL. It was governed by BVI law.
I have deliberately used general descriptive language in explaining the arrangements to relay the general thrust of the transaction. I will refer to aspects of this more specifically later where necessary.
Continuing in a general vein (and adopting parts of the chronological narrative helpfully provided by Vector), the SSPA underwent several renegotiations and amendments. The effective date of the SSPA became 10 th January 2019. The ‘Completion Date’, as defined in the SSPA, became 24 th January 2019. This was the date by which Vector was required to comply with its payment obligations to pay the first two tranches of US$5 million each, under clauses 3.1(a) and (b) respectively of the SSPA.
Vector did not do so. On 31 st January 2019 MGI gave Vector 10 days' written notice to remedy its breaches of clauses 3.1(a) and (b) of the SSPA.
Vector was also required, under clause 3.1(c) of the SSPA, to make available to MGIH6 the Shareholder Loan Facility of no less than US$10 million by 7 th February 2019. Again, Vector did not do so.
Further renegotiations ensued. On 9 th February 2019 MGI undertook not to enforce its rights under the SSPA in respect of Vector's failure to remedy its breaches of clauses 3.1(a) and (b) until after 15 th February 2019. This deadline was subsequently extended to 7 th March 2019.
But before then, on or about 24 th February 2019 Vector entered into a Convertible Note Agreement with certain investors (‘the Convertible Note Investors’) pursuant to which Vector borrowed a sum of US$4,750,000.
The following day, 25 th February 2019, MGI and Vector entered into a Standstill Deed, pursuant to which MGI agreed not exercise any rights under a particular clause of the SSPA, clause 7.3(b)(ii), for so long as any sum remained outstanding to the Convertible Note Investors. That clause had required Vector to complete the Definitive Feasibility Study by a certain date, failing which MGI had the right to call for a retransfer of the Shares.
Vector has since sought to argue, and indeed appears to have commenced ICC Arbitration against MGI to establish this, that the Standstill Deed did not concern a standstill only of Vector's obligations pertaining to completion of the Definitive Feasibility Study, but that it impliedly also entailed a standstill of Vector's obligations to provide the Shareholder Loan Facility.
By 7 th March 2019 Vector had successfully discharged its obligations to pay the amounts required by clauses 3.1(a) and (b) of the SSPA, namely the first two tranches of US$5 million each. But Vector was still in breach of its obligation to make available the Shareholder Loan Facility pursuant to clause 3.1(c) of the SSPA.
Between March 2019 and July 2020 Vector tried, unsuccessfully, to raise money from other investors. MGI accorded Vector this latitude.
But by mid-September 2020 it appears that MGI had had enough. On 17 th September 2020 MGI gave Vector 10 days' written notice under clause 7.3(a) of the SSPA to remedy its breach of clause 3.1(c), being its obligation to provide the Shareholder Loan Facility to MGIH6.
Vector's response (on 21 st and 24 th September 2020) was to notify MGI that it disputed MGI's entitlement to exercise its right with regards to the release back to MGI of the Escrow Documents.
Undeterred and apparently unimpressed, on 29 th September 2020 MGI issued an instruction letter (‘ Instruction Letter’) to HCSL requiring it to release the Escrow Documents to effect the...
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