M4 Investments Inc. v Clico Holdings (Barbados) Ltd

• Jurisdiction: Barbados
• Judge: Williams, C.J.
• Judgment Date: 12 March 2004
• Neutral Citation: BB 2004 CA 7
• Docket Number: Civil Appeal Nos. 2 and 4 of 2004
• Court: Court of Appeal (Barbados)
• Date: 12 March 2004

Court of Appeal

Williams, C.J. (Ag.); Williams, J.A.; Moore, J.A. (Ag.)

Civil Appeal Nos. 2 and 4 of 2004

M4 Investments Inc.

and

Clico Holdings (Barbados) Limited

Appearances:

Mr. Alair P. Shepherd, Q.C., Mr. M. Adrian King, Miss Hanna Chrysostom and Miss Annette Linton for the appellant.

Mr. Garth Patterson, Mr. David Thompson and Mr. Satcha Kissoon for the respondent.

Sir Henry Forde, Q.C. and Mrs. Doria Moore for an interested party.

Practice and procedure - Application to strike out — Order 18, Rule 19 Rules of the Supreme Court — Claim can only be struck out of it disclosed no reasonable cause of action — This was not such a case.

Williams, C.J. (AG.):

INTRODUCTION

1 These appeals are from two orders of Blackman 1 made on 12 and 13 January 2004, one ordering the appellant's amended statement of claim to be struck out as it disclosed no reasonable cause of action and the other refusing the appellant's application for an injunction restraining the respondent from disposing of its shares in Caribbean Commercial Bank (“CCB”) pending the trial of the action.

BACKGROUND AND PROCEEDINGS

2 The appellant is a company incorporated on 26 April 2002 in the British Virgin Islands. Its sole shareholder is Mr. Mariano Browne, who at all material times was President and CEO of CCB.

3 The respondent is a company incorporated on 18 May 1984 in Barbados and was “the holder of the legal and beneficial interest in the issued outstanding share capital of CCB”. The respondent was part of the C L Financial Group and C L Financial Limited owned all the shares in the respondent. Mr. Lawrence Duprey was Chairman of the Group, Mr. Andre Monteil was Group Financial Director and Mr. Leroy Parris was Chairman of the respondent.

4 On 15 July 2003 the appellant and C L Financial Limited signed a document called “Heads of Agreement”, which is set out at paragraph [8].

One of the issues raised in the Court below was the respondent's allegation that Mr. Monteil had no authority to execute the Heads of Agreement on behalf of C L Financial Limited. However, this issue does not concern us for the purpose of these appeals.

5 On 15 September 2003 a meeting took place in Mr. Parris' office, attended by Messrs. Duprey, Parris and Browne. Mr. Browne alleges that at that meeting an agreement was made to sell the shares in CCB for BDS $50 million to the appellant. Mr. Parris denies any such agreement and states that the respondent insisted on “a good faith deposit being paid prior to any agreement being considered”.

6 Thereafter, the parties entered into correspondence. On 1 October 2003 Mr. Pains wrote to Mr. Browne stating that, “in a meeting with Mr. Duprey wherein we discussed the proposed purchase of the Caribbean Commercial Bank, I understand that you will be arranging for a down payment of ten percent (10%) for this purchase by October 15, 2003”. By letter dated 16 October to Mr. Browne, Mr. Parris extended the time for payment of the deposit to 4.30 p.m. on the said 16 October. On the same day, Mr. Browne replied that he had been unable to make the necessary arrangements and stated that he expected to be able to meet the request for the deposit by 22 November. On 21 October Mr. Parris wrote to Mr. Browne stating that as the deadlines of 15 and 16 October were not met, the respondent had no further interest in selling the shares of CCB at that time. Mr. Browne replied on 27 October stating that the Heads of Agreement were not contingent on receiving a down payment by 15 October. By letter dated 14 November the appellant's attorney-at-law wrote to Mr. Parris stating that the appellant's increased offer of BDS $54 million for the shares was “still alive”. However, on 18 December the respondent signed an agreement for the sale of the shares to Royal Bank Trinidad and Tobago for BDS $50.4 million.

7 A writ and a separate statement of claim were filed on 30 December 2003, claiming the relief set out in the prayer of the amended statement of claim filed on 8 January 2004 except for damages, which were for the first time claimed in the amended statement of claim. On 30 December the appellant also filed a summons for an injunction and on 6 January 2004 the respondent filed a summons to strike out the statement of claim and for security for costs. It is against the orders made on these two interlocutory applications that the appellant has appealed with the leave of the judge.

HEADS OF AGREEMENT

8 The Heads of Agreement was signed on behalf of the appellant and C L Financial Limited on 15 July 2003. Although referred to in the amended statement of claim as the “Letter Agreement”, we refer to the document as the Heads of Agreement. It is such a crucial document for the determination of these proceedings that we have set out the same in full, as follows:

“BARBADOS

• 1. These Heads of Agreement are entered into on July 15, 2003 by:

  • 1. 1. M4 Investments of 14 Jubilance, Sandy Lane, Barbados (“the Purchaser”);

  • 1.2. CL Financial Limited, a company incorporated under the laws of Trinidad & Tobago whose registered office is at 29 St. Vincent St. (Company Number) (“the Shareholder”) of Caribbean Commercial Bank Limited, a company incorporated under the laws of Barbados whose registered office is at Lower Broad Street, Bridgetown Barbados (Company Number…) (“CCB”);

• 2. The Shareholder has agreed in principle and subject to contract to sell to the Purchaser or his nominee and the Purchaser has agreed in principle and subject to contract to purchase 100% of the issued common share capital of CCB (“the Shares”) for a price of BDS$50.0 Million completion to take place on or before October 15, 2003.

• 3. These Heads of Agreement are subject to:

  • 3.1. a full legal, regulatory and financial due diligence review on the affairs and business of CCB satisfactory to the Purchaser by the Purchaser's representatives being completed not later than September 30, 2003, which review shall be commenced forthwith upon the signature hereof and in respect of which the Shareholder shall extend all necessary co-operation to the Purchaser and the Purchaser's representatives;

  • 3.2. the granting of all necessary governmental and other consents and approvals including without limitation permission of and any necessary approvals from the Central Bank of Barbados. In the event any such consents or permissions are not obtained within a reasonable period following the date of signature hereof, the parties shall assess the situation and determine jointly a suitable course of action;

  • 3.3. the negotiation, agreement and signature of a suitable definitive agreement appropriate to the transaction detailed herein and warranties appropriate to the transaction detailed herein with the following special matters to be included:

  • 3.3.1. the nominee of the Purchaser shall be Mariano Browne

  • 3.3.2. the purchase price of the Shares shall be settled as follows:

  • 3.3.2.1. combination of cash and loan to be determined.

  • 3.3.2.2. the balance sheet of CCB at June 30, 2003 shall be warranted and the financial affairs of CCB shall be in no way worse than the position disclosed in that balance sheet.

  • 3.3.2.3. warranties appropriate to the transaction shall be given by (i) the Shareholder to the Purchaser and Mariano Browne (including without limitation a general warranty of the collectability of all receivables of CCB after making allowance for bad debt reserves), and (ii) the Purchaser to the Shareholder and Mariano Browne.

• 4. Save as required by law each party shall keep confidential and shall not make a public announcement or other disclosure in respect of these Heads of Agreement or the transaction contemplated herein, without the consent of the other party.

• 5. The parties shall agree upon the most effective and cost-effective method of structuring the transactions detailed above, and the parties further undertake to review and, if necessary, to renegotiate any materially affected terms and conditions of these Heads of Agreement if for valid and substantial reasons the transactions are structured so as to cause serious deviations from the original intent.

• 6. The Purchaser hereby agrees with and undertakes to the Shareholder to negotiate in good faith with the Shareholder concerning the transaction detailed herein.

• 7. In consideration of the Purchaser (a) agreeing to enter into these Heads of Agreement and to negotiate in good faith with the Shareholder concerning the transactions detailed herein, and (b) putting in hand the review referred to in cl. 3.1, the Shareholder hereby agrees with and undertakes to the Purchaser the following obligation which shall be a separate obligation legally binding upon the Shareholder and separately enforceable by the Purchaser:

  • 7.1. the Shareholder shall not, directly or indirectly, knowingly encourage, solicit or initiate, nor engage in or participate in, discussions or negotiations with, nor provide any information to, any company, partnership, person or other entity or group other than the Purchaser concerning any sale, merger, business combination, acquisition or other similar transaction involving CCB (whatever the form or nature of such transaction, including without limitation a transaction effected by the sale and purchase or the issue of shares, and/or by the sale and purchase or assignment of any of the assets of CCB).

  • 7.2. if these Heads of Agreement terminate pursuant to cll 8. 1 or 8. 2 or 8.3 the obligations contained in cl 7.1 shall also thereupon terminate and be of no effect.

• 8. These Heads of Agreement and the understandings herein set forth shall come into effect immediately upon signature by both parties and unless otherwise mutually agreed shall terminate:

  • 8.1. on the execution of a definitive agreement pursuant to cl 3.3 expressly superseding this Memorandum;

  • 8.2. on the date (if any) that the Purchaser notifies the Shareholder in writing that he...