REPL: ORDER OF THE COURT OF APPEAL FOR BERMUDA DATED 24 MARCH 2017

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Qtbe QCourt of peal for 1Sennuba

Between:

CIVIL APPEAL No. 24 of 2015

KINGBOARD CHEMICAL HOLDINGS ET AL.

-and-

ANNUITY & LIFE REASSURANCE LTD ET AL.

Appellants

Respondents

Before: Baker, President

Bell, JA Clarke, JA

Appearances: Mr William Wong QC and Mr Jeffrey Elkinson/ Mr Ben Adamson, Conyers Dill & Pearman Limited, for the Appellants

Mr Jan Woloniecki, ASW Law Limited, for the Respondent

Date of Hearing: 6 & 7 March 2017

Date of Judgment: 24 March 2017

JUDGMENT

Clarke, JA

1. The question in this appeal is whether the Chief Justice was right to find that the affairs of a publicly listed company had been conducted in an unfairly prejudicial manner.

2. The company is Kingboard Copper Foil Holdings Limited ("the Company") , a Bermudian company and the fifth respondent to the Petition. (In the remainder of this judgment I refer to the parties by reference to their status under the Petition). It was incorporated here on September 10 1999. It is managed principally from Hong Kong. A Prospectus for an Initial Public Offering was issued dated Decem ber 6 1999 and, as a result, its shares became listed on the Singapore Stock Exchange. More than 60% of its shares were at the material times owned by Excel First Investment Limited ("Excel") , a BVI company - the fourth respondent. Excel itself is owned by Kingboard Laminates Holdings Limited ("Laminates") , a Cayman company - the third respondent. Laminates is owned as to nearly 75% by Jamplan (BVI) Limited - the second respondent, which is owned as to 100% by the ultimate holding company in the Kingboard Group of companies, namely Kingboard Chemical Holdings Limited ("Holdings") , a Cayman company - the first respondent. These direct and indirect majority shareholders in the Company are ultimately controlled by a group of individuals related by blood or marriage who are based in Hong King.

3. The Kingboard Group is a leading producer of printed circuit boards ("PCBs"). The Company manufactured copper foil, which is an essential material for the production of PCBs, in China, where it is one of the largest and most advanced manufacturers of that product. Its business model involved selling almost all of its copper foil to Laminates. Laminates was listed on the Hong Kong Stock Exchange in 2007.

4. A minority of the shares in the Company were held by those who were not members of the Kingboard Group. One of those was Annuity & Life Reassurance Ltd ("the Petitioner") , the respondent to this appeal. The Petitioner is a subsidiary of Pope Investments II LLC ("Pope II") , a Delaware company. Pope II is a pooled investment vehicle which invests on behalf of its clients. Pope II made its initial investments in the Company in respect of the shares which came to be owned by the Petitioner in July 2009 and acquired more thereafter. According to the Petition Pope II had initially purchased an ownership interest in the Company in November 2006. The Petitioner acquired its shares in the Company and became a registered shareholder on April 7 2011 in contemplation of the present proceedings. By July 18 2011 the holdings of the Petitioner and Pope II amounted to over 80 million shares being more than 10% of the Company's shares.

   The History

5. As is apparent from the nature of the business carried on by Laminates and the Company there was a potentially acute divergence of commercial interests between the two. It was in the interests of Laminates to obtain copper foil as cheaply as possible in order to maximise its profits from the sale of PCBs; it was in the interests of the Company to secure as high a price as possible for the foil which it supplied.

6. It was no doubt in the light of the tension between these rival commercial interests that the Prospectus included the following two statements:

   "The price at which any copper foil is to be sold to the Kingboard Group after the listing...shall not be lower than that at which the [Company and

   its subsidiaries] would have at the relevant point of time sold to other customers generally ...

   The gross profit margin achieved from sales to the Kingboard Group after the listing ...shall not be lower than that currently achieved ...until [the Company] meaningfully d iversifies its sales..."

7. The Prospectus stated that future inter-Group sales would be regulated by a Supplies Agreement the terms of which were summarised [73]1. That Agreement was dated 29 Novem ber 1999 and was amended by Supplemental Agreements of 5 November 2006 and 13 December 2008. These Agreements were between the Company and Holdings. The first Agreement provided, in essence, that sales of copper foil should be on arms-length terms and on the standard terms for the supply of foil by the Company and its subsidiaries to third parties and at no less favourable a price than that at which the Company would have sold to third party customers. The latter two Agreements provided that the price should be in accordance with the then prevailing market price and that in no event should the terms be more favourable to the Kingboard Group than that offered by the Company and its subsidiaries to independent third parties.

8. The Prospectus also said:

And

"All transactions involving the sale of products of the KBCF Group to the Kingboard Group will be summarised and submitted to the Audit Committee for regular periodic review to ensure that the terms of the Supplies Agreement, including those relating to the determination of the price of copperfoil to be sold to the Kingboard Group, are ad hered to."

1 References in square brackets are to paragraphs in the judgment .