Friday, October 30, 2020

Court of Appeal berates BCL liquidator

By Khonani Ontebetse

BCL’s financial woes deepened on Friday as the Court of Appeal upheld an appeal by Russian giant Norilsk Nickel Africa and awarded a legal cost bill against BCL expected to run into millions of Pula.

BCL’s liquidator Nigel Dixon-Warren drew sharp criticism from the Court of Appeal for fighting Norilsk’s “claim every step of the way” with “little progress being made in winding up of” BCL mine and “embarking on litigation in South Africa.”

The legal dispute between liquidated BCL mine and Russian nickel mine giant Norilsk will hit the tax payers where it hurts most-in their pockets. The legal bill is expected to swell as BCL will now have to defend the matter before the London Court of International Arbitration (LCIA).

The Court of Appeal judgment follows a decision by the High Court not allow it to pursue its claim for damages against the government of Botswana and BCL Group to be heard in LCIA.

Court of Appeal’s Justice Jacobus Brand noted that a provisional liquidator (with the leave of the court) or the final liquidator (with the leave of creditors) may compromise and admit Norilsk’s unliquidated claim for damages against BCL.

“I say this because Mr. Dixon Warren has made it clear from the outset and on numerous occasions that he will fight the Appellant’s claim every step of the way,” said the judge.

The High Court last year rejected Norilsk Africa’s request that its dispute with BCL over a botched deal be heard before a court in London.

He added that this involved every “possible technical point available and even embarking on litigation to set aside the Minister’s approval of the transaction aside. Added to that is the fact that the winding-up process of the Respondents has already taken more than a year with little progress.”

The dispute between the parties emanates from a 2014 deal in which Norilsk struck two agreements with BCL Limited to sell its 85 percent stake in Tati nickel mine and its 50 percent stake in South Africa’s Nkomati Nickel to the state-run nickel producer for $337m. The price was dropped to $277million. The Botswana Government decided to place BCL in final liquidation in 2016 blaming the company’s cash position and low commodity prices.

Brand noted that in December 2018 Norilsk gave formal notice of terminating the share sale agreement with BCL upon accepting what it describes as the ongoing repudiation of the share sale agreement by Dixon Warren.

“This of course does not change the essential nature of proceedings before the LCIA. That forum will still have to decide whether or not the conditions precedent in the share sale agreement had been fulfilled,” he said. If this issue is decided in favour of BCL, he said, that is the end of the matter.

But if it is decided in favour of Norilsk, Justice Brand said, the LCIA can then proceed to determine the quantum of Norilsk’s damages upon termination.  

“The effect of the change is to give Mr. Dixon-Warren a choice whether to accept or repudiate the Respondents’ obligations under the agreement. The reason for the change is not difficult to find,” the judge said.

Brand added that “it is because it is clear from the papers that Mr. Dixon-Warren had decided long ago – perhaps rightly so – that it not be in the interest of Respondents’ creditors to abide by the share sale agreement.”

Justice Brand said the truth of the matter seems to be that in order to prove their claim against the Respondents (BCL), the Appellants (Norilsk ) will have to establish that the share sale agreement became unconditional and the quantum of their damages upon termination of the agreement.

“It is plain to me that both these issues can only be determined by LCIA. The inevitable conclusion is therefore that to preclude the Applicants from proceeding with the arbitration in the LCIA would be to prevent them from ever proving their claims. The point is that the claims are clearly not frivolous and to deny Applicants the opportunity to prove them will amount to a serious injustice which can never be endorsed by this court,” he said.

The judge also chided the liquidators for having embarked on irrelevant kinds of issues “which gave rise to a substantial increase in papers filed,” adding that “On the balance I therefore think that the general principle in this regard should prevail, which means that costs should follow.”

Setting aside the High Court decision, Brand ordered that “The appeal is held with costs including costs of two counsel against First and Second Respondents jointly on paying the other to be absolved, such costs to be costs in the liquidation of First and Second Respondents.”

He also ordered that Norilsk should commence and prosecute arbitration proceedings in the London Court of International Arbitration against BCL pursuant to clause 29.3 of the share sale and purchase agreement entered into between BCL as seller and Norilsk purchaser in October 2014.

The judge also ordered that in the event that BCL does not concede that the share sale agreement is unconditional, the court in London should determine whether or not the share sale agreement is unconditional.

He also ruled that in the event that it is determined or conceded by BCL that the share sale agreement is unconditional, the court should determine damages to which Norilsk is entitled.

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