Directors ordered to pay over £77 million for "straightforward misappropriation"

The Royal Court of Jersey has ordered two former directors of Gold & General Limited to pay more than £77 million after finding they caused the insolvent company to transfer its 84% stake in Metallon Corporation Limited to one of the directors for no consideration.

Andrew Wood and Alexander Adam of Teneo, liquidators of Gold & General, obtained summary judgment against former directors Mzilikazi Khumalo and Tulani Sikwila over the October 2021 transfer of 84,000 Metallon shares to Khumalo. The Court found the transaction had no documented contractual basis and produced no discernible benefit for Gold & General.

Gold & General, a Jersey company now in creditors’ winding up, had held 84% of UK-incorporated Metallon since 2014. In February 2020 it also assumed a pre-existing liability of Khumalo to Sir Samuel Jonah for US$12.5 million plus interest. After paying only US$1.25 million, the company failed to meet the remaining US$11.25 million plus interest when it fell due in November 2020. The liquidators argued that Gold & General was unable to pay its debts from at least that point.

Against that background, Khumalo and Sikwila caused Gold & General to transfer its entire Metallon shareholding to Khumalo in October 2021. The liquidators found no agreement governing the transfer and no evidence of payment or other consideration. In July 2023, Khumalo subsequently transferred 74,000 of those shares to Three Rivers PTC Limited, trustee of the Southern SelliBen Trust, whose beneficiaries include Khumalo and members of his family. Sikwila was also a director of Three Rivers.

The Court held that Khumalo had no real prospect of defending the liquidators’ claim under Article 176 of the Companies (Jersey) Law 1991, Jersey’s analogue to section 238 of the Insolvency Act 1986. The transfer was made within the five-year lookback period, Khumalo was connected with the company, and the evidence supported a finding that Gold & General was already cash-flow insolvent.

The Court also found no basis for the statutory good-faith defence. Rather, it characterised the transfer as a “straightforward misappropriation” of Gold & General’s assets for Khumalo’s benefit and to the detriment of creditors.

Sikwila was held jointly liable under Jersey’s directors’ duties regime. The Court declined to decide whether Article 176 itself could impose liability on a director who did not receive the transferred property, noting conflicting English authority on the point. It instead entered summary judgment against him for breach of his duty of care, skill and diligence, finding that he either assisted the transaction or, at best, was “asleep at the wheel” while Gold & General’s principal asset was transferred away.

The judgment is also notable for its treatment of creditor interests. The Court said the English Sequana principle has not yet been formally adopted into Jersey law, but observed that there are “strong arguments” that it should be recognised where a company is insolvent or bordering on insolvency.

On quantum, the court accepted the liquidators’ valuation of the transferred Metallon stake at £77,041,670 as of 14 October 2021. That figure was derived from Metallon’s later administration materials, including a statement of affairs valuing its assets and liabilities, adjusted to reflect Gold & General’s 84% holding.

The valuation exercise was complicated by subsequent transactions involving Metallon’s mining assets. Metallon owned Bulawayo Mining Company, which in turn owned three Zimbabwean gold mines, as well as a 75% stake in Great Lakes Telecom Infrastructure Limited. Metallon entered administration in February 2024.

Metallon’s administrators later agreed to sell its shares in Bulawayo Mining Company to Greenstone, a connected Cayman entity, for approximately £53.2 million. Only £600,000 of the first £10.5 million instalment had been paid by the time of the Jersey judgment, and Metallon’s administrators have issued High Court proceedings in England seeking the outstanding consideration.

The Jersey court said the later transaction was not arm’s length and could itself be viewed as another step that moved the assets further from creditors. It nevertheless accepted the liquidators’ higher valuation based on Metallon’s statement of affairs as the best available evidence of value at the time of the original 2021 transfer.

Khumalo and Sikwila were therefore held jointly and severally liable for £77,041,670 plus interest. Any recovery from Three Rivers, against which default judgment has already been entered, must be credited against enforcement against the two directors.

Read the decision here.

L. C. Gregory acted for the liquidators.