I 11'1 TilE GRA,"'!) COURT OF TilE CA YMA,'I ISLA. ... OS 2 IIOLl)EN ,\TGEORCt: TOWN 3 t' L"'Al'lCIAL SERVICES DIV ISION 4 CauK No: n!) 103(20 11 S Wo(m~rI) Ca ul<! NO).. 246/20(9) 6 7 IN TilE MA rrt:R m' TilE CO.\lP ,\~I LS 1 ... \ W (2011 R£,'ISION) (AS AMENnED) , 9 10 II 12 BETWEEN: 13 14 " 16 " 18 "'''0: 19 20 1I 22 2J " " 26 27 28 A~a ... n(n: 19 JO 31 " 3J " " J6 31 J8 39 40 Sdore: 41 lIu rd: 42 Supplementary Submiuions: " .. I. LA,'ISI)OWNE LlMrn:o
SILEX TltUST CO;'>I!'",",'" LL\IITEO I . MATADOR L"'''ESTi\lENTS I.J;'>IITED
t:NGLEFIELD IIOLDINGS CORr. Mm MARITIME GUERRAJ" D- IIER.\ltS Mr . • ·nods T"1I:tlf Q.C. iMlrune<! by ~lr. 'blth~ Gouc"c of " al""n on bthaJr of Ih, Ap~ l laDI' Mr. ~1.lthe'" Collinit' Q.c. ia.lru(te<! b~' Mr. Jayl<Oa Wood nf Applehy nn behalf of the Sttond Ii.e,;pondtnlil Mr. Nit:tl MteI<On Q.c. and Mr. t'n!H'r lIughn of Con)'tn l)iU lad Purman on bthalfoftb,Offidall.lquidator The lion. Mr. JUiI\lCt Charln Quia 28" and 29"' June 2012 Suppltolen'al'} ,..riltta ,ubminlons filed by aU Ihrt't parTies on tbe 2)" aad 24"' July ~012. Pag~ I if6f) 2 3 4 , 6 7 8 9 10 II 12 13 " I , 16 17 18 19 20 21 I.
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" T RQOt'CfIO' The Al'P"lIanls are lansdowne Limiu:d ('"Lansdowne"'), 8 ~ompany mcorporntcd in N",;s, and Silex Trust Company Limned ("S;iex'1. a oompany incorponucd in Switzerland on behalf ofthc Bron2c Trust ofTonola, British VirgIn Islands. Th~ Company, Matador In'-CSlmenlS limited. OIhcrwi5e known as the Fund. was incorporntcd on the IS" April 2005 as an exempted company under the laws of the Cayman Islands, 10 opcrnte as ! private investment fwKI. and ils registered office is located in George Town, Grand Cayman. Cayman Islands. On the IS· May 2009 the Appellants presented their Pel1tion 10 the Grand Coun of the Cayman Islands, secking the winding up of Matador. punuam to $.91(d) of the Companies Law (2007 Revision) (As Amended), Oil the 21'" August 2009 the Cou" acctded \0 the Pe1iiion and l~ Company was wound up in accordance wnh the Comparucs Law. and Hugh Dickson of Gran! Thornton Specialil;( Sm'ices (Cayman) Limited, was appointed as the Official LIquidator of the Company On the 26'" February 2010 the Appellants lodged their proofs of deb1s WIth the Official liqUIdator. On the 2"' February 2011 the Official Liquidal0r rejected the Appdlarn.s' proofs of debli. 2 ] 4 5 6 7 , 9 10 11 12 Il 14 15 16 17 18 19 20 II 22 2J 24 25 26
On the 23"' February 2011 the Appellant~ flied apJX:l\s and sought the following a. Bolh Appellants ask thaL the "'lcclion of their respectwe proof' of deb! be set aside; b. Silex asks dta! ils claim be odrruued 10 proof in the swn of £,1.170,915.39, plus post·liquidation ;tlleresl at tne mle of 7.75~. per llIIr\Um. ,n aC«Jroance with 5.149 of the Companies law. 0.16 r.12 of th ... Companies Winding Up Rull'S and the Schedule to the Judgment Debts (RBtes of !nlo:rel;l) Rules. c. Lansdowne seeks an OnIer thaI ils claim be admitted 10 proof in tm: sum of USS 1.397.446AO and £.1.673,577. 7S - wllb;>051 liquidation 'merest at the same: mte as in the Appcal submilled by Silex. Se1 out in b. abo\'e. d. Both Appdlants seek an Order 1hal thelt costs be paid out of the asselS of Matador. On the 16" March 20 \ 2 alllh ... panics entered into a COIlSet11 Order which stated as follows: Thill Ihe (lppeals IN listed/ar Ihe hearing of II pm/imina'), issue .mh a lime e$rimal~ of one day on Ihe firs, amUable dare con'~'nienr 10 Munsel for Ihc ApJX"anlS, Ihe Official LiqUIdator altd Ihe mh~r SlJareholui'n (Iogelher, Ihe "Parli'eJ ") after fony-llm (42) daYI from Ihe dme of Ihis Order ("Ihe Hearing") for Ihe purpose af delermining Ihefollo.ling legal issues on Ihe oosis of Ihe agreed lla1emMI offacts prQ\'idedfor JM paragraph j Ix!lo ... : a) ~s Ihe agreemenl, if any. referred to ilt lI'alerJ4 and mflde heMeelt Mn. War~rs Imd E,'Q Gerrond-lfemlis. b,rni Mlllmlor [mY:JlmCltIS Limiled (Ihe "Compa''J''') mId ,herefor", ,h~ Official Liq"idmor? 2 3 4 , 6 7 8 9 10 II 12 13 14 " 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 }
b) If Ihe (ms",!,r /0 J (a) is 'Y"'< ", is the effect of such agreemem Ilrm flrl! emill'es through "hie/r Mrs. WOlers Inwsled "..,r~ 1101 subject/o any lemt$ (comained in Ih€ Company's Artides of Associa/ion or Q/hcn.;se) thm "·,,uld hm-e tire effect of liminng. puvcnling Or d"faying cilh~r redemption Or payment of redemption proceeds? c) If fir.: answer /0 /(b) is "yes", does thO! m<'<1n that tire redemption rights of lire entjllt's Ihrough .... hich Mrs. Walen acquired shares in the Company are no/limited Or affected by SUSp€r/Sion of redcmprions. sI<spension of paymem of "'denoption proceeds Or any gme ... hich may Ira'", been ,mposed? d) If the anS ... "r 10 Ire) is "yes ", daes Ihal mCan Ihe Officiol Liquidalor would (aSSl/mmg tire Appel/ants ulrimll/ely pre .... ail on the appeals and pro." the "lIegations made in Walen") be oblig,yj 10 admil Ihe Appel/ants' proofs of debl m fi'" on the INlsis of p/l'I1d"d "Pn'mIlry CIOlm/CI",m A " nam,,(v: •. Tlte sum oj- I. USSI.J97.-U 6.40 and CI.67J,577.75 III respect of Ll1l1Jdo .... ~~ 11"'/ I. £I,170.915J9 in rfSpeCI of Silex: or a Iternllli wdy. ,,' Some alher ~m~ulllS (and. if so. ... .. hut amollnt)), (Ihe "P/,diminary Issue'). fOr I~e a,'Oidance of doulN Ihe mMlen to be orgued on Ihr hean-ng at Ihe /fearing shall be limiled to I~e Prelimmary Iss14e. If Ihe Appel/milS arf ... ·holly mUIICCI!ssju/ on Ihc preliminary '-simes Ihe Ponies agr"e Ihat; a) Tlte Appellants $halilake appropriate meilJ"rfS 10 discanlln"" Ihe Appea/s b) TIt" Official Uq",'dator shull be at liberty Immediuld>' 10 prrxecd with Ihe Winding Up of Ihe Compony'J e.Wlle. pay disiriblliions 10 (Jdmil/ed credilors alld pay any Jurplus 10 Ihe Company's membe,., m uccan/unce .... ilh Ihe Comptm;eJ u,w 1/ Ih~ ,If/pel/ants are successful m ",'/Ole or in pan, on II", prellnlllUl'Y iss"e, Ihe panies ugrl'/' Ihat 1 2 ) 4 5 6 7 8 9 10 11 12 13 14 IS 16 17 18 19 10 21 22 23 24 25 26
12, , oj A further <ijrecliom hearing in respect oj the sururanril'fl hearing of the Appeals shall IN liJled for hearing all Ihe first a,'aj/able dille thfreu!rer. b) For the Q,'O,t/ana of doubt In Ihis ~'<'nllhe Appel/allis shall /:Ie enlilled ro (ldduce ""jdelter in rep/)' /0 the el'idena filed and sen'l'd b.y Ihe OIlier !<hareholders on the Appeals. The Olhcr Shareholders sholl hmY' lea.", 10 oppeoraM be "curd On the Appeau and the ff('Dring AND IT IS DIRECTED rflAT ,. Wilursi' shall sWlld as Ih~ Ag,ud SUllcmem of Fa cIS '" respect of and for the sale p"'pose oflhe Hearing.
For the sole purpose of Ihis Hearing the Founh Affidavit of Mrs. Pricilla Walers ("P\Vlswom on the 9'" September 2011 ("Water!! 4") shall stand as the Agr.:ed Statement of Facts_ The Caliri has also read Bnd reviewed the Firs! and Second Affidavits of the Official l.iquidator dated the I- June 2011 and the 25"' May 2012, n:spoctively RE.L£VAST CIIRQSQLo<ir AS" F.KTS In 1999 PW" met Eva Gucmmd"Hermes ("EGH"'), who was then 'mown as Eva Blazek, EGH told PW that she was in"olved in the financial invl"Stmt1ltli industry and "'!IS a money manager. EGH told PW that she ran the Ea5tem European division of Credit Suisse. PW recalls that EGH sought to persWlde her ell husband, Roger Waters ("'Mr. Waters""), to tn"cst money with Credn SUISse. PW could not recall whether Mr. Waters did in\'es! or not, Page j t>fW 2 J 4 5 6 7 8 9 10 I 1 12 13 14 is \6 17 \8 \9 20 11
WatersJ discloses that in July 2001 PW separolcd from Mr. WalCTS and around this lime EGII wa.! very supporli,'c From 2001 !O 2004 PW and EG~I became vcry good friends. EGH mamed Olaf Guerrnnd·lI~ ("Olaf'). Olaf. falher was Patrick. Gucrrand-H~-rmes - one of five siblings thaI presently control the Hennes luxury goods empIre. PW confirmed thaI Olafs mother. Mamoe GUeTTlllld·Hermes. was one of the other sltarellolders in M~tador . PW assumed WI Olafnnd EGH h.1d a great deal offamity money. EGH and Olafhad a daughter. Aquila. and thty asked PW \0 b<: her godmother. At this time. PW and EGH were firm family friends. After P\V's divon:e PW has some significant funds and made certain investments in the United Slates. EGIl lold PW thaI ber "",sting investments werc no! properly structured and that she should consider other oplinll5. EGl/lOld PW that she. EGB, was making a 10\ of money from her own in\CSlmenlS and thaI PW could have the saine opportunltlcs. EGH told !'W thaI professional money management options such as private or inv<:stm""t bankers would charge her very high fCC5. EGH told PW that she would therefore ~ much better off cODC""trnting all of her mo:.mey in" joint venture WIth EGH. EGII discussed ~ering into a joint ventWT with PW. EGH 1nlted about them setting up a new fund ..... hich they would est:lblisb together and run as partners. EGH tnew that PW had 00 experience, but that she was a fast learner and EGH would leach PW everything ~hc neuled to know, and, together. they would control how their money would be invcsted. , ) 4 5 6 7 8 9 10 II 12 13 14 15 16 17 IS 19 20 21
On the 12'" or 13'" Ocmber 2004 EGH came \0 PW's house and they decided 10 embark upon a joint venture in which Ih<")' would ",on: together m pannefship. as PW was inexperienced in financial maneT'O. In October 2004 PW asked Mr. John MacKay ("Mr. MacKay"'J who was a dlfeCtor of Mount Sirttl Advisory Services Limited and Mount Street Investment Management Lmllied \0 give her finnnclal adVIce. PW asked Mr. ~kKay to attend the me",ing with EGH in October so that he could hear "hal EGII was proposing. PW slated in Waters4 that she knew that if she agreed 10 go mto this joint "rnturc with EGI-I she would also need Mr. MacKay's assistance !O cash In be.- US investments in order to make her ;m-estmem In the proposed jOint ,-cmure. In October 2004 EGII intnxluccd PW [0 James Loughran ('Mr. Loug,hrnn"), an English salienor. "ho apparcmly had significant c.~pericnce ad\'ismg high nel worth indIVIduals in cOlUleclion "'ilh offshore investments. PW recalled that Mr. Loughran Wa5 well known to EGH and her family. EGll and Mr. Loughran advised PW that she needed to gCl her money Out of the US and invest it oITshore. and that the Joint venture would be her oppornmity tQ dQ that. Over the next few m(mtl\s EGH and Mr. Loughran !IITIInged for Lansdowne to be incorporaled and for the Bronze Trust to be set up on PW's behalf. PW understood that these entities w .... e to be used as her investment vchicles into the new Fund. PW 8V= that 10 tho: hest of her recollection Mr. MacKay arranged for Silex 10 act lIS Trustee oflhe Bronze Trust. 2 3 , , 6 7 , 9 10 11 " Il " " 16 17 18 19 20 21 22
PW was !Old that the reason these c01illes wen: fonned was lhat they would be Ia~· cff..cr;,-e SlJUcturc. for h~ inwstrnena into the joint venture that EOll and PW had been discussing. EGI! and Mr. MacKs} became directors of Lansdowne. PW srud she acquiesced and agreed 10 this strocture beams .. she trusted EGH" s judgment. PW had full trust and confidence In EGH - that EGH would look out for her and fie,. inlereslS In connechOn their discussions genetlllly and in rdation to Matador. PW a'-en thaI EGH was a",-arc ofwh .. re PW's money W8S, and that EOf! constantly pressed her to gel all her monc), offshore. and. In partIcular. to ,"VCSt It all InIO Matador. DIscussions belween PW and EOH continued In early 2005. PW avers lh3t all the conve~lioJ\li Wilh EOH l!coerally dealt ,,-ilh (WO distinct issues. First " 'as the Jomt ,,,,,ture and the seUlng up of the Fund gencrn1Jy. and that both of them would make substantial investments m the Fulld ~ which was a sigruficant teon of the joint v~mure. The second issu~ discUSl;ed was the basis upon which PW's personal investment in the Fund would be made The substance of these early 2005 d,scu<;sions for the propo..:d joinl ,"enlure wer~ summ"nzed in the fa;.; from EGH to PW dated the 1~ Mar.h 2005 in whi~h EGIl proposed the following: a. The Company would be a ··fund of funds" ~ likely Cayman Islands domiciled; b. The Company would be called Mont ArOOislnWSlnI.·ntS: c. The Company ,,·ould hi"" USS20,OOO,OOO.00 in pn\lIle family funding (i.e. EG!! and PW through their associated companiell would be the 10lllal Page 8 of6(J 2 ) 4 5 6 7 8 9 10 II 12 13 14 IS 16 17 18 19 20 21 22 2~.
investors). although (hey would seek 10 raise addi!ionalthird party fundi al a differem Urne. d. The Company would also look to raIse USS8.000.000.00 in levemlle funding from Cl'I!dj, Agn"cole lndowr.:. e. The Company would "en, accept US investors: r There "'Quld be a nl:ln:lgement company called Monl ArboiJ Management. which would receive a ['/. management ree and looi. of the '''upside inc~lllin allocation." PW Slales thai dunng this Ume EGH told beT lhal Olaf would ha,e wrne stight invoh"ement ''jIootinE W()IInd In lite backgro~"d, kt:eping an f)'e 0(1' for "s" but, mainly dealiog with "rhe leg/II side of Ihi~g.(·. PW stated thai. along wilh EGH. she had H number of discussions about the best name for a Fund. After Mont Arbois Luniled, EGH proposed "Matadof' be.::ause, as :;he told PW, "Olof hlJ</ Q /O/l(}O vi u Matador", PW said she liked Matador bell.". and they agrerolo proc~ with I>hllKlor. Duong March and April 2005 EGH and PW CQnllnued to speak r.:gularly aboul thl: ncw Matador joinl venture. PW Ij,j1ld that she and EGH discussed the basis of PW's in"CSlment tn lhe Fund. EGH told pI,',' to prq>arc a budget of her future financial nee<h so thaI PW would know how much money she would need to Withdraw from Ihe Fund from lime 10 lime. PW said lhat EGlllold her that she should be able to withdra" as much money as ~he needed every '[\laner. PW added in Wal=4 that EGIl knew that she would be In"csting vinuall~' all her liquid assets tnto the Fund Pag~ 9 of6l'! 2 ] 4 , 6 7 8 9 10 II 12 I] 14 I , 16 17 18 19 20 ZI Z7.
and that. therefore. she, PW. would need to make regular redemptions to m~ her living e.~pc:nses and 10 meet any unforeseen requiremems. PW said il was agreed that there would ha,-e to be distinct and Sq>arlI1C tCl'Truj under which she would be prqw-ed 10 make her investment. PW said the discussion!; focused on 11';0 is,,",C!i - i.e. (a) her ~l in\,estmclII in the new Fund and how that would be slruC\urro and (h) the new bWllness \"ofI!ure generally. PW $,lId it was imended (hallhey would start up with a new Fund into wllich both EGH and herself would invest personally. Once the new Fund was ''up and running" 1\ would be opened up 10 lhird party investors. On or about April 2005 PW rc1ained Mr. MacKay to ad,ise her generally in connectIon with setting up the Fund and the jomt Venture. PW said that. as she had no real e_~ p<:rience in this area, she relL she nceded assistance going forward in connectIon With agreemglhc final form of the documentation thaI would generally be applicable 10 the Fund and 10 all·1hird party". in'csunenls that would be made in the Fund. PW wanted Mr. MacKay to act as her agC"Dt for her in\'estmC"Dt vehicles and 10 act for them (EGH and PW) in connection wilh actually making her initial investment in the Fund. PW said il surpnscd her when she learned that after Matador w'as incorporated in ,\pril 2005. the two direc10rs were EGH and Olaf. PW s:ud she did 1101 realise th:tt Olaf Intended to be a dtreCtoT. as it had been agreed that the duectors would ha,-e been EGII and herself. Pag<! /0 of 60 2 3 4 5 6 7 8 9 10 " 12 13 14 15 16 17 18 19 20 21 22
31
ll. 00 Or about the IS· April 2005 PW met will! EGH and Mr. MacKay to discuss 1M u,: implications of lcmlinaling her existing m,'estmmts and investing her money in Matador. On the 19- April 2005 EGB •• 111 PW and Mr. MacKay an email Klhng OUI ,'moos malters ... hieh needed attention In order for PW 10 make an investment in Matador. This email made II clear that EGH and John MacKay were goIng 10 be sogruuones of lansdown ... Rnthscllild was going La be cus!Odian. and Ihe Rothschild signatories would be EGH and Mr. MacKay. to this email of the 19'" April 2005 EGII i\3id she would for .... ard a blank copy of the subscription documents. EGIl s.aid she would ask Mr. Loughntn 10 provide certified copie.; of the Articles of AssocIation. confilTTllllion of I"Cglstration from the trade and companies rcgistrnrs and a list of authorised signatories. EGH promised 10 fn","'aro lIle private placement memorandum and !iubscription documenTS for PW's and Mr. MacKay's information. On the 21- Apri12005 PW and Mr. MacKay rcccived IlIl email from Mr. Pierre De Ba~ker (""/'Ir. DeBacker··) of ROl~hild. in which he stated thaI pursuant to EGII·s in~tru~tions he was forwarding. as an atlaclune1ll. a Pri,·atc Plac=eru Mtmorandwn ("·PPM··) for Matador. an InVe5lOr Pack for :>.latador. the lnv"'l!men! Management Agreement bctw~ Matador and Matador Management Ltd .. the Memomndwn and Articles of Associal;on of Matador and of Matador Management Ltd. Mr. DeBacker added that these documents were the latc~t draft vers,ons available and would be subject to minor amendments prior 10 Ih" laWICh of P~ge 1/ vfOO , 3 , 6 7 8 9 10 II " JJ 14 " 16 17 J8 19 20 21 22 13 24 Jj.
Matador. Mr. DeBacker also added thaI. should PW and Mr. MacKay have any CjueslIom regardlflg the foregoing. they should nOl hesitate 1(1 CQn!a<;t ROIhKhild. PW said lhat around tlus lime she rccei,-cd a telephone call from EOB, who lold hCT (PW) Dol 10 COncern hen;elf "!lib these draft docurnm15. Ill' 1"" terms of her ioveslmrn[ Into Matador would not be g<lyemed by the striCt tenus of the documenlS which would govern Olher contemplated third·pany lnveston' in'estmen! in the Fund. and these draft documents "ere the standard Fund documents intended for other fi.uure investors. PW saId thai, by that lime. she had already retaIned Mr. MacKay and she intended to lea'-c it to him to fin:dise the Fund documentation with EGH. On or alxlIll the 25'" April 2005. Mr. MacKay ammged. on PW's ""half. for the transfer of 53 million US dollars (U555,300,OOO.00) and GBP 14 million (£1,400.000,00). to be made in order for PW's investmml vchicles. Lansdo"Tle and Silex. to \fl"cst \fl Matador on her ~half. On the 2t" April 2005 PW and EGH signed an "A~ent '" PrilK:lple" which I'W belie~ed was drafted by Mr. MacKay. This AgreemCf1t in PrilK:iple slated, "PWand EOH agree Ihal Ihey will draft and $ign Ihe .hart:hoida agrerm~nI bet><wn them .mh regards IG Maradar Management Ud .. Ihe mmlllgcmCni rornpcm), of Ihe im~lmenl fund. ,valador Im<JSlnlf'nI Limited - balk Cay"",n rompanie$. PW and EGII ,,1$0 agrud Ihe bu$ic principles for ,haring Ihe nCI fees aftcr Ihefand und mallagemellt romp!"'}' related caSIS. 77Iey indlu/ed Ihat allllel fl'es accrued 10 MWlldor Manag<'nl<'/J1 Ltd. would be ul/oCIJlet! 50"..4- 50% bi:t><vcn PW and EOn All nClin<"l!nlil'e feel wo,,'" be alJocaled 75% 10 EOHand 15%/0 PW:' PUg~}l DIM 2 ) , 5 6 7 S 9 to II 12 lJ 14 15 16 17 IS 19 20 21 2l " 25
The "Agreement tn Principle" 8150 'laled: "PlY and EGH "Vel! thai Ihe Pri",/.> P{"cement MeltWrondum for Mu/ador /nws/meIllS 15 10 be amended as agrecd be"';e"" the IWo shareholders_ These amendments .... iII include, Inter alia, umendmL'lJlS 10 lite sec/joltS regarding hedging, cq",,/i;u>licm, Ihe custodian and uilminiJlfGliw ugre.'m'>M/ ~71h Rothschild, Ihe i"varmem objeclj,w 'I1Id policies, Ihe im'eslmem reSlricn"", (inc/ud;ng ""lXim"m in"Wment si:e), gearing, shorl sellmg, le":ra~, red .. mplioll nghl5 (momlily Qr quarterly, ".ilh 90 Ifays notice. or a, olh~,.." .. i£e ogrud by I'll' and EGH), fu "",,,run', the appoinrrtu'nl 0/ directo/'! ami Ihe appoimment a/auai/ors. " The "Agreement in Principle" belween PW and EGH continued: "The liming/"r Ihe abo,'e alJCllmentaliolJ Ilm,-mJmcntJ 10 befinaliud is;" rite jOl/l' weeks joflQl<l11g rhe sigoowre of lhi! agn'emefll or as olhe""'$[! agr~cd between PII' and EGH.·· In WatCf"S4 PW said that she was '.ery inexperienced in muners of this SOI1 and did no-! reclthm she was eqUipped to deal with the d~~ils of the Fund documcmmion that needed to be finalised. Accordingly. from this poilU on, she Idi it for Mr. MaeKay to act as her agent in the setting up of !he jOint venture and 10 work with EGII in finaliZing Ihe documentation that would be app1ieable to the Fund generally. On lhe 1ft February 2011 Mr. MacKay provided PW with a ltller wruch confinned his prcsen<:e at two me~inl!S wilh EGH aodlol Olaf. and which also explained his understanding of the terms of PW·s in"c:s1mem!ll Matador. Mr. MacKay i\8id Ihal he recalled tWO meetings in which ]>W'5 financial im"Qt!llCTlt was dis.::ul>SCd. as was PW·s requiremem 10 be able to sell the mares in order 10 provide her WIth an f'ag~/Jof6(J 2 l 4 5 6 7 8 9 10 II 12 Il 14 15 16 17 IS 19 10 21 22
irn:ome and with necessary funds for oilier pW"])Oses. as was the ownership of the LnU'stmcnt manager and the share of mana gem em fees anributable 10 P\\'. Mr. MacKay said, " ,/0 rhe beSt of my r-ecollcc/ian EGH dill spccifiy /0 PlY thm ,he in''''''lm"m mllJe lI'(I$/iqllid in "utllre. ,mJ Ihe ~xi.<lCm:e of (1/'Y d<luse 111m .... 'mld restrici PWfrom r«o.'ermK the s,,,,!.! jrr''e.Jled "<l.l' nOl men/ionta " "-II. MacKay saId. "{ IIndUJI()(!d !hlll ,,,ell 0 reslficlion "W all" of the ccnlli/iom imposed On PW', ;IIl'''Slmenl.'' 10 C(lndusioo Mr. MacKay said. ·',.,il wos exp,..",-'" agreed that PJf'shollll1 be the benefit."iar}' ofo proportion of tht income of Ihe nwnllgemenl fees (including pciformance /eo:s) paM by the in''e;-tmem Sin/ClUTe ..... hich { beli" .... " was formnli=ed thereafter", .. Tiling:' PW confirm<:<!;n Wru=4 thallhe terms oflhc draft PPM, whicll ""ere 10 be agreed between EGH and PW. wen: never. in fact, dIscussed funher "ith her. The Coun learns from Mr. Dickson's Second Affidavit that the Initial SubcripMn form in respc.::t of Silex was signed by Leonard O·Bnen. ('·Mr O'llri,,"'·) wlto was a director of Silex on the 10" May 2005. In October 2005 EGH and her family were: involved in a ,·ery serious car accidrnl in wluch EGH·, daughter. Aq1JJla. who wa. also PW's goddaugll1cr, died. Olaf remained in a coma for some month. and the relationship bc1wccn EGII and PW P"I!.~ U oj«J 2 3 , 5 6 7 , 9 10 11 12 13 " 15 16 17 " 19 20 21 42 appears \0 have detmOfated. PW :;aid there was no opportunity 10 di:;cuss tile joint ,'enlure any funher and PW said lihe was 1\01 consulted about anything to do With the Fund. at all. from thaI point. It was DOt wlIil vcry rorly 2007 that there "'lIS any fuJther contact - lhal was "'hen PW introduced her new financial adviser, Nick Moss (""Ir. Moss') Mr. Moss had advised PW that .he needed to redeem the enlirc1y of her mvestm<'1It In Matador for Illlt reasons. PW was then in contact with EGH on a regular hasi. and PW a,-erred that EGII told her lhal EOH would he able to fund the redemption by introducing family money into the Fund and then paying PW Ollt. PW deposed in Walcrs4 that, In .urnmary. she would agree 10 invest in Matador on the follo"'IOg basis: a. II was essential thaI mVe5unent was liquid and it could De reahzed as and "hen .he needed funds; b. EGH and PW would be equally ,""ol,'ed in the management fund; C. EGII and PW would receive a 50010 shan; of Ihe managc:mcnt fee and "ould .hare the incemiye bclween IhmlSeiyes 75% to EGH and 25% 10 PW: PW said lhal she and EGH had nO discussions in ",lanon to the lerms of lhe Fund documentation. PW said lhal, had she beerl nwore lhal the documenls <.:Ontainl."d provisions whkh ga'·c the Fund power to Impose any gate or to su.pcnd redempnons in respect of any investment ntade by her. through the ApJlt'llants, Page /J ,,1M) 2 3 4 S 6 7 , 9 10 11 12 13 14 IS 16 17 18 19 20 21 22
Lamdowne and S,I ...... she would nOI run-e caused the Appellrntli to mv~t in !hI! FurK!. In Waters4 I'W averred that: "£OH kM>I', III U remit of O~r disews;", ... leading up IQ Ine/ormllliQn of tire Fund. I;'m Ihe money f >IllS imending /0 i,,''('Sf WaS nlilhe mOM)' I h<ld /0 lil'e on, and support my filmo'i)' ..... irh, and Ihall co,,'" nUl ond ""1II1d nol make any /nwslmem mlO a S/n,etUFe ,hal mhiblli>J jn any 'my my ability to /iquidare aSsels /IS on,/ ,,-hen I need~d funds," PW also averred thaI EGH made representations 10 the effect that: -Th~"e ,,'Ould f>e no res/rie/ions imposed IJPOn my inl'ts/menl whjcles oT1<ilhe ability (() ... ithdro" m(m~ from lite F'lnd in urdu II> presen"e til)' liq",-dity, by "Jlich ! me/ln Ihol il ""'S dell,.ly ,,,,denlood ami agreed ber..wn me and EI'U Ihlll my asJers 1I'0"Id III olllime.f remilin liquid ... hUe 1/1".wcd in the Fund ., PW said mal EGH and herself did no! discuss the draft PPM Or the Anicles, and, in fact, EGH had acuvely encouraged PW 10 disregard them ali !rrele\ant, as !hey did DOl contain the terms which would govern PW's inH::stment, and would only 8Wly 10 future investOB. Accordingly PW said did not pay much attention to the draft documentations when they wt're Senl to her. and she left it \0 Mr. MacKay to discuss those OOcUJTlmts with EGH and fmalise them. On or aOOlll the 27'" March 2008 Lansdowne submitted redemption requests for all of ;\5 sbares in the Fund - 22,829.362) shar~'S of the subclass of the US dol18l' PtJg~ /6 0[60 2 l 4 5 , 1 8 9 to 11 12 !3 14 " 16 17 18 19 20 11 22 so.
" sulx:lass. and, 18,911.84.11 shares of the GBP subclass of the Fund far an effoctl\~ redemption date ofthc 30~ June 2008. On or abwt the l~ April 2008 Sil,,_~ submitted its n:dempuon requf'Sl for all ils sMres in Ihe fllnd, namely, 13.232.8037 share!; of the GBP subclass of the Fund, for an efrccth"" redemption date orlhc 30· June 2008. On Ihe 27'" June 2008 the di=tors of the Fund rewlved to Impose 8 10"/. scale down or "gate" on redemptions at 30" June 2008, and for aU following redemption days until further 1lOIictc. Accordmgly. the Fund maintains thaI on the 30· June 2008 redemption day Ille Fund was only required 10 pay 10% of the overall value of the shares in the Fund. with a further 1 ()t,. payable a1 the next redemptIon day On the 31- De.::ember 200S. and on successive redemption dates until lhe gale was lifled or the !;Cal" doWII redemption reques1 was satisfied. On the 4'" August 2008 the Fund made a pan payment of £401.671.00 10 Silex and pan payments of USSI.237.062.01 and .(573.905.80 to Lansdowne. On the IS" May 2009 the Appellanti. Lansdowne and Sile.'. presented a Petition for the winding up of Mat.ldor pursU.:lnl to s.92(d) of the Comparues Law (2007 Revision). On the 27'" August 2009 tbe Court made an Order that Matador be wound up in accordancc wilh Ibe Companies Law and that Mr. Hugh Dicbon ofGmnt Thornton Specialist Services (Ca}man) Limited be appointed as Official Liquidator of the Company. Pag~ 17 0160 2 ) 4 5 6 7 , 9 10 II 12 13 " 15 16 17 18 19 20 21 22
6<l. On (he 26· Febnwry 2010 Lansdowne submiued a proof of debito the Liquidator. wilh a primary claim for the total SI.Il1l of USSI.397.446AO and £1.673.517.75. which is based on a full rednnption by Lansdowne of ali ItS shares in the US dollar subclass and aliI!. shares In the GBP subclass of the Fund. as Illhe 30" June 200S. On the 26'" February 2010 Silell submitted liS proof of deb! and ils primary claim was for the swn of £1.170.915.36 based On a fuU rednnpllon of ils shares of the GBP subclass of the Fund as at the 30" June 2008. On the 2"" February 2011 the Liquidalc>r reJected Lansdowne's primary claim and «'lied upon the 10% sate impo:;.ed on the 30'" June 2008. "hieh the Liquidator ... ~ "as applicable 10 the 30· June 2008 redemption day and 10 su~ucnl redemption days. The liqu"ialor maintains thlll bolh the primary claims of SIlex and Lansdowne do rtOl recognise the c/Tecli,'c imposition of the 10'% gale by Matador for the 30· June 2008 and SUbsequ""l redemption dates. The Liquidator confirmed that the Appellants claims arc both subject to the applicalion of the I~' gate to the tOlal aut 31" o...:"",ber 2008. and ao:;ordingly, is prepared 10 dutribute. lfl the case of Lansdowne. £114.4ll4.17 and in the case of Sil~x £114 . .\04.17. As I stated to panlgtaph 7 above. on the 23" February 2011 the Appellants filed Appeals. pelltioning that the Liquidators' r~ection of their respective proofs of debt be SCI a.ide. and limber. that their claims be adrruued in full, and the monies distributed fonhwilh. 2 ) 4 , 6 7 8 9 10 " 12 II " " 16 17 18 19 20 21
POSITIO' Of"AI'PHLA.\TS I» ,,~ A.- ~ I"~ AgrumnJf bind 11r~ Fu"d g"d therel"" 'he Ofjkial Liquidator'! l eading Counsel for the Appellants submits thaI, the "Agreement In Pnndplc" bclween PW and EGH ~onlained terms \0 the efTe<:1 thai certain documentation rel~ling to the Fund and information set out in Ihe PPM de1ermirung the basis upon which invcstments in the Fund would be met. would noI apply to certain shareholders, i.e. the AplXlIanls. and. in particular. the Appellants would be able 10 redeem thell entire tnl'esunem or any pan the=f upon any of the redempuon Funh=nore, Counsel for the Appe!1anl.'l argued that only the Fund. i.e, Matador itself. and not an indi\'idualshareholder in Ihe Fund. can enter into a legally bmding and effecllve agrtt1l1Cnl upon IWcb terms as these. Counsel argues that II "'as the mtentlOn of EGH and PW that these terms would he legally binding and effect;,-". as thry musl bOIh have iruended that EGH would cause the Fund t\I C1Her into un agreement In her capacity as a direct\l1" of the Fund. l eading Coonsel on behalf of the Appellants .ubmits that on the agreed sta1<:ment of facts contained in Watcrs-l. il is evident that both PW and EGH did indeed intend these terms of the agreement 10 be legally bmding. Funhmnore. counsel relies upon PW's c\·idenct. as set out in paragraph 45 abo,-e. and submitS that any analy~is \0 a contrary effect i~ not rationaL P"g~ 190[60 2 J , 5 6 7 8 9 10 II " Il 14 " 16 17 18 19 20 " 22 2l os.
The Appellant. SUbUU1. that evidence from Walers 4 makes il cie;l, that both panies intended tbe agreemCTIt \0 include a tenn lila! there would be no restrictton upon PW'lability \0 redeem her investment. which would be binding upon the Fund. The Appdlanl$ argue thaI when EGH gave the a5SUIlUlC<'S to PW, which they submit. subsequmtly Ixcame terms of the Agreem~m. EGH held herself QUI and was held Out as doing so in her capacity as a dUe!:lOr of the Fund and. PW beheved and was intended!O belie ..... thaI !his was the capacity in which EGII was aCling 10 thaI the agreement would be binding upon the Fund. The AppellanLs concede that while SOme of the tcnns ortlle Agnxment In Princ,ple were negotiated. Or being diliCussed prior \0 tbe incorporation of tbe Fund, the panies only entered imo. and concluded. the Agreement on Ihe 25" Apri1200S -the dale upon which PW's investment "cltides first corrunined 10 in"C'ling and did tnycSI lD the FW>d. The Appellants submit thm, by this lime. lhe Fund was incorponncd und capable of enlering inlo lransaclions and EGH was a direclOr. Consequenlly. lhe Appellanls ~ubmil lhal EGH had lhe aUlhority to .. mer imo the Agreemem with PW on behalf of the Fund and the Agreementl~ therefore bindIng upon the" Fund. The AppclJams rely upon Aniele 54{b) of the Fund's Anlcles of ASSOCiation. "hich provides that: ·· .... thc sole dlre(:1o~ {such Of £OH] sh~1I be enlulcd to e:rerc:ise ~II of the po""'" Qrtd fu,!ctjo~s of the I/j,«IOl'S ",hich moy be imposed o~ them by I~", 0' by tllese Anid",_ .. PlJge20 of60 2 l 4 , 6 7 8 9 10 " 12 Il 14 15 \6 17 " \9 20 21
Accordingly. the AppcUanl5 submil1hat EGH 111<:l"<'fol'l: had a<;tuaJ ~ulhorily 10 bind th ... Fund to the terms of tile Agreement as il5 agent. In the ait=mtivc, the Appdlanls submil1hat EGH had usual or ostensible authority 10 act as agen' of the Fund when entering u1l0 the Agrttment, for Ihe following rcll5Oru;:
EGH entered into the Agrecmcm wilh the I:nowledge and agrttment of all the shareholders in Lhe Fund. t."'. the \'ehicles of her and PW. Thus the oonduCl of the members llIII<,Iurucd to a representaUOII thai EGH had authority to enter in10 tlte agreement OIl behalf of lhe Fund. ii. The condu<;\ of the directors of the Fund also amounted to a representation thaI EGH had authority to bInd the Fund to lhe terms of the agreanC!lt as 10 which: a) PW believed thaI. pursuanl10 lite terms of the agreement. she and EGH were the twO direclOl'S of the Fund. Clearly. therefore, PW believed thaI both direcrors of the Fund had confemxl authority u.,o" EGH 10 enter into the a~CCJT1<"!\t on hehalf of the Fund: b) In faCl. Olaf and EGH .... ere the IWO dIrectors of the Fund_ Howe\'er. Olaf had pal1icipated with EGH in makin~ the a5SW"lIOCes and promises which formed the terms of the Agreement upon which PW IIOW seeks III rely. 2 J 4 5 6 7 8 9 10 II 12 13 14 " 16 17 IS 19 20 " 22 13
75 The Appellants submit that both directors of the Fund had repr=ted that EGH had authority \0 enter imo the agreement On behalf uflbe Fund. In adlhtlOn, the AppeUams submit that Ul the case of the Appellant. Lansdowne. the subscnpMn agr~ents were signed by EGII in her capacity as director of Lansdowne. and the Lansdowne investment could oot have been made wnhout her signature, EGH is the 8Uthonty to sign on behalf of Lansdowne, and was qunc clearly doing so upon the terms of tile Agreement. The Appellant Lansdowne submits Ihm /IIaUloor. also acting by EGH. was aware that EOH"s authority Wlli so hmned and "35. accordingly. bound by the terms of the Agrttmenl, In relation 10 the first bsue CA) contained in my Order daled the 16· March 2012, the Appellants submit that EGH and PW intended thai EGI-I emer inlo the Agre<:men\ in her capacity as a director of the Fund. und. secondly, EGI-I bad autllority. actual or ostensible. to bind the Fund \0 tile terms of the Agreement. TlIcrcfore. the AppdlanH; ~ubmit that the Agreement is binding upon the Fund, and therefore upon the OffiCIal Liquidator, Inu~ (B): II~o, i~ Ih~ ~ffut "Is""h Agrum~'" su~h Ihalllt~ Appel/a",s .. ..,r~ ,,01 .<"bjur '0 on)' I~r"'s (~onlai"ed ill Ihe Fund '5 Articles "r Ofh~",ls~) .hol .. .,lIld ha • .., Ihe ~Jft!'" "I /i",ilillg, pre"enfillg Or J,,/ayillg cil"er ,eJe"'pti(m 0' PUJ''''''''' "I Ud~",plioll procudsr In relation 10 this second issue Ihe AppeUanlS' leading Counsel. Mr, Trc:geat conlCllds that it w;u; a term of Ihe agreement between PW and EGH thai cmain documt:ntat,on nllachc:d to Mr, DeBacker's email dated the 21 -" Apri12QOS, which 2 ) 4 , 6 7 8 9 10 II 12 13 14 IS 16 17 IS 19 20 21 22
included the DllIfi PPM. the Investor Pack. and the Anicles would nol apply \0 the Appellants. and "'as only intended to apply to third pany investors. Alternatively. 1tadillll COWlSc\ for the Appellana argues that it was a term of !he Agremlen\ thaI the draft PPM. tbe lm-eslor'. Pack and AMicks of Association. should not apply \0 the Ap~lIam. to the ""tent that Iho:y were inconsislCnL With the Agreement between PW and EGU. As such. Leading Counsel for !he: Appellants submits thaI the Appellant. were lI()i subject 10 any terms contained in do<.:umentation which purponed !O limit, prevent or delay redempuon or payment of redemption proceeds. Th.e Appellants submit thaI. in any ~'cnl. pursuanllo the AgremJen\ in principle, a final PPM was \0 be agreed between PW and [Gil within four weeks thereafter. The Appellants contend that lhis did 001 happen and so IK> fmal PPM ever ~ imo effect. Leading CoW\SC1 On behalf ofmc Appellants submits that. aside from this, the temu; afth" Agre.emem also expn:ssly provided thai PW's mvestmem "chi,les would be entitled to rede..'1l'I (hetr enllre in,e;s(ment in the Fund. upon any Redemption Date. wilh no restrictions on =eiving the proceeds o[o:aeh Redemption. Mr. Trcgear. argues that even in the absence of a separate I,,"" to the effect that (he PPM and Articles did 001 appl~' to PW, any Ierm, "hcther in the Articles. the PPM or elsewhere, which purported to limit, prevent or delay Redemption or the payment of Redemption proceeds, would be oonlr31)' to the agr=ment. \t would. accordingly. not be open to the Fund. and would be in bre<Jch oflhe agrcernen( for PogdJo!6IJ 2 3 4 , , 7 8 9 to 11 12 IJ " IS 16 17 IS 19 20 11 22 8"
me FWld \0 seck and cnforce any such 1<'1ltl. CourtS<:1 argues thai the PPM "'as new, in rmal form. In fact. Mr. Tregear argues thaI this was a Wme-ma<!e. unorlhodo~ vehicle, put together "round the kitchen table:' In addition. the Appellants contend that II IS common prncuce for Hedge Funch to enter into side leiters or a~o:mcnlS with o~ or ~ invO:Slon granting preferential lCTll1S of investment. Preferential Imns frcqUC11\ly include greater liquidity or nn absalce of restrictions upon lodups or gatts. which apply 10 the mal11 body of investors. tn the case before Coun the Appellants comend Inallhe Agreement was an oral s,de agr=ent between the Fund and PW, Seiling the terms upon which her in'-estmeru was made. The existence of the agreemrnt, they subrrut. was disclosed to all of the investors in the Fund, being the vehicles of EGH and PW. Accordingly. the Appellants submit Ilml tile Agrttmell\ therefOR' had tile legal effect of o\'erridlflg any prmisions and any of the corporate documentation WIth which II wlIS iocornpatible so far lIS redemption bj !he Appellants was concerned. lbe ApJl!:l1ants argue that !he PPM is simply a documenl provld.Ulg IIlfOmlalioD to prosp ... ;ti,,, iO"O$IOI$lo enable them to make an infonned deciSIon as 10 whether 10 invest in a panicular Fund. The Appdlams argue IMI il is clearly possible for a Fund to mlch agreement with an individual investor. prior to Iheir investing, and that particular provisions of the PPM. including any restrictions or Iinutations upon Redemptions. would DOt 3pp\y 10 thaI panlcular Investor. Funhcrmore, the Appellams Slale thaI, in !he absence of Pag~Uof60 2 J 4 , 6 7 8 9 10 II 12 II 14 " 16 17 IS 19 20 21 86
clear words in lhc Ankles of Associa!ion to the contrary. the legal relationship bet",eeo a Cayman ~lands Fund and ils investors is typically defined by the Anicles of ~iation and not lite Off..ong Doo;umcnt. (Sec Lord Mance's dicta at parngrnph J I of $"ategir Tn"'UNJllnd J[lllU' P'lnners Limited 2012 (2) C1LR
The Appellants eomond that the pro'~>ions In the PPM upon which the OffiCIal Liquidator sought to rely when, ruling that a gale upon redemptiOns had been effectively imposed. allows the directors of the Fund \0 scale down redemptions to 10"/;' of the issued and outstandIng shares of any particular subclass on any redemption dale in the evcnt lhal they dolcnnine thai the redemption mjucst WQUld materially prejudice the interests of the other shareholders. Consequently, the Appellllnls argue that it is evident that this is illC()mpatible wllh the terms of the Agreement. 10 the effect tlult then: would he 00 resmcuon upon PW's abil,ty 10 redeem her inveslmenl in the Fund, and thaI, accordingly, the proviSIon in t~ PPM does nol apply 10 PW's ,",'c,lm",,1 v~hicle~ and cannot be ""forced agamst them (the Appellant,). Acoordingly, the Appellants subnlll lhal any allempl to enforce this provision of the PPM againsllhe Appellants oo!tslitul~ a breacb of contract and is unlawful. The Appellants COntend !hal the Fund is not and was not entItled 10 unpos.e any gale On the redempliQll by the Appellants. Ar1icle 5(m) of the Fund's ArtIcles of ASSOCiation reads: 2 J 4 5 6 7 8 9 10 II " Il 14 15 16 17 IS 19 20 21 22 2l 24 25 26
"IfSQ 1/awl in Ihe Offering /t.Iemorondum, if/he Comp<my receiws any requRSI for redemplion in respect of anyone Redemption Ouy, Mhe' singly Or' when oggrcgamd H;lk OIn,>, red.''',!,li"" requesrs so reCi'il'ed, rcprc.fcnling mOre Ihan 10% of Ihe net (metJ of Ihe Company. the DireclOrs may ,..,fllS" to honour 1111 such redcmplion req" .. JIJ Ihal exceed 10% oflhe net assets of the Company 011 Ilw relcwml Redemption Duy. fn d,·/.>rmirring which rWi!mplion .reqll .. SIS are 10 he smi$Jied QuI of lhe Company's olui/ubl .. ClJ!;h r"un,;!s. requests for redemplioru ...-ill be r"ti!lced proponi"nutery and for uny subseqllcm Redemption Day. olllSlonding de/cITed n!demplion requestS \\'ill be hO!Jo~",d prior 10 nCH' ffltemplloll "'quells at t"e Nm Asset 1"lue per shore on :ruch subseq",'m Rcdempriofl Day." In addition the words "Offering "'k1l10rnndum~ an: detlned in the ArtIcles as: "The Primle PlaCi'm~m ML'lIIortmdum ()rotkerojJ.'ring documenu, pu"mam to "hick lind on the terms ond conditions o/which Ihe Red,'emable Shllres of fIlCh CiIllJ lire offered for purt'has~ III Ihe same rnay be amemlcd or supplemented by the Diroclorsfrolll lime 10 time," The Appellants submit that this provision in Ihe Articles, which they ~Iaim were only proVIded 10 them on draft fonn. and which EGH specificaUy lold PW 10 disregard on Ihe basis lhat it had no application 10 her, is the proviSIon on the Articles upon which the Official Liquidator is relyin~ in Its rejection of the AppellanlS' proorof debt, The AppeJiants contend, as wilh Ihe eqUIvalent provi.,on on lite PPM. lhal My intenl 10 enforce lhis provision in the Articles, as agalru;t Ihe Appellanl~, would cOlL'ililUle a breach of the agreement be\wet.'II EGIl and PW, Funhermore, Ihe Appcllams conlend lhat Article 5(m) expl'C'SSl>' Slales al Ihal the provisions seI out therein an: only enforceable if so S13\ed in Ihe PPM. 2 J 4 5 6 7 8 9 10 II 12 \J 14 15 16 17 18 19 20 21
In !his case, the Appellants submit thai the PPM it:;elf. or such pMI. of the PPM that 5~k [0 impose restrictions upon redemptions contrary to the agm:ment be!ween EGH and PW, are nOl enforceable a~ainst the Appellants. They further submit mal no final PPM was ever agr«d in accordance with the IgrectnmL In princIple. and therefore it follows thai AI1icle S(m), rdcrnble to and d~'PC"'denL upon ~U<.:h restrictions. Can haw no application as agniru[ the Appellants. In SU!IlITI.l!)" m retallon to Jnue B. the AppeUants submit'
Any attempt to enforce reSuiC'llons. 11Illitnuoos or gates upon redemptiOn!; as against the Appellants would IlOl be open 10 the Fund and would be B broach afm ... Agreement: and n. AccordlD~Jy. any lenns pU'l"'rnng to ha,e such effect contsmed In the PPM. the Anicles or otherwise. are unenforceable as against the Appdlants; and iii. Alternatively. Anicle SCm) relied upon by the d,redOrs in purponing 10 enforce n gate. takes effecl only SO far as the PPM allows this action to be taken. As against the Appellants. the PPM docs OOt. SO thi!; Article is Ineffoxtive; and IV, In any event, it was an c~pressed term of ,!Jc, Agrecmenlthat the PPM and the Articl~ would not apply 10 the Appellants' investments m the Funds. Pag~ 17 11/6fJ 2 3 4 5 6 7 8 9 10 II 12 13 14 15 16 17 l' 19 20 21 22 23
In"~ C: M ••• if So, rJ~S IhQ/ ",~a" thuillte R",J~mpriQn rights "I,he ApfUllrmn /",- 1101 limil.-" or ajJecleJ by any SUSPC'U;IJ/IS of redempr;IIns, suspemion "1 fHJJ'mem ofredemplion proa ('ds oron gale "'/rklt may hit • ." bun imp lJstd?~ The Appcllams commd lhat If lhe answ= 10 l s.ue~ A and B are res. then any aUertlpt 10 suspend redemptions. suspcnd pII)mrnt of redemp!ion proceeds, or impose a gate upon redemptions. as against PW or the Appellants. would amount 10 a breach of the Agreement and "QuId be unlawful. i~pe<:ti,e of an)' provisions in the PPM. the Anieles of Assodalion or other documentation. The Appellanu; contend thaI there is no lawful mechanism whereby the Appcllllll!s' mkmpt;QIl rights may be limited without the Fund breaching the Agrecmcnl. Accordingly, the redemption rights of the Appellants cannoI be and ha,'C nOi bern limited or affected by suspensions or gales. which may have !x:en purponedly imposed. 1»,,1' D: M ••• if 0'0, dOl'S fhatllre"" thallhe Offidal Liqll;lla,o, K'tmld be obliged '" admlttht ApfWllams' p,oofi' ofdebl il/full,," the oosis of plNllell pri","ry Clal", A?M The proof~ of debt in respect of the primary claimlClaim A of each of the Appellants seck payment of the amOunt whIch would have t>een payable to that Appellant upon a full redemption of all its ~hare in the Fund upon the 30~ Jun<: 1008, less the amount which was n:ceived on or aroWld the 4" August 2008 in TI':ipe<:t of that redemption dale. 2 3 4 5 6 7 8 9 10 II " 13 I' 15 16 17 18 19 20 21 22 23
The Appellants !;wle IMI, wjlh n:spec\ \0 their redemption request. the po.i,tion is that I. On or about the 27'" March 2008 Sile~ submilled 3 rcdmlplic)]} request \0 Rothschild for all ilS remalfllflg shares III me Fund. heIDi 13,232.8037 shares of me GBP subclM' of me Fund. for 8 Redemption Day of the 30" June 2008. The nel asset \'alue per GSP share as at that date. ll5 cnkulatoo by Rothschild "'8S £ 118.84. Acconlingly, Sile~ ""as due \0 receive £1,572.586,39 upon redemption: II. On or about the 27'" March 2008 ]..ansdo"'nc submine<! a rromtptlon request \0 Rothschild for all ils remaining shares in the Fund. being 18,911.8441 shares of Ihe GBP subclass of the FWld. and 22,829.3623 share!; of (he USD subclass of the Fund. for a Redemption Day of the 30· June 2008. The net a.set vaJue per GBP share as al IMI <illle as calculated by Rothschild was £118.84 and per usn share was USSI1SAO. Accordingly. Lansdowne claims il was due to rece,ve £2.247,483.SS and USS2.634.S08.41 upon redemption. III. The redemption requests referred to in subparngrnphs i and ii above wen: submitted properly and there is 00 question surrol.l!lding their ,·alidity. IV. 00 the 27'" June 200S EGH and Olaf in their capacities as dire<:l0r5 of the Fund. purponed 1(> pa:;s a wlinen resolullon of the Fund resolving 10 "apply The nrlc of deferral of,...,kmptions· gale aI June Jrt' aM all fo//oll"ing rl'/lcmpllQn doys until fur/her nOlice:' Pagd9o!M 1 3 4 ; 6 7 8 9 to II 12 13 14 " 16
17 18 19 20 11 22 ", EGII and Olaf maintain (hat 8S a result of Ihe oper:mon of Ihe gale. PW WIIS only entitled to !"¢'dean shares representing a maximum of 100,. of the shares in ,ssue of any particular .ubcla~s. A,CQn!ingly. in August 2008: a) Sile.~ recei'C'd £401,671.00 In respect of irs redemption. leaving £ 1.170,91 5.39 outstanding; and II) l&!sdowne receIved £573,905.80 and USS1.237.062.01 in respect of ilS redemplion. 1e':l\ing £1,673.577.75 and USS 1.397.446.40 outstanding, VI. In any evem the partial redemption proc«ds referred 10 in paragraph v. above. wen: substantially in e;(cess of I 0"10 (almost 20"/0). vii. Bu\ for Ille purported imposition of Inc gale by resolullon. dated the 21'" June 2008. Lansdowne and Silex would have been erllillo:d 10 rccCl"C. and the Fund would h3,,, been obliged 10 pay to them. the amount set nul in sub paragraphs L and ii above. The Appellant> therefore submit thai if the 3.Jlswen; to queslions A. B. C are yes, the director.; could noI ha,~ inIpOSed a gate or any other form of restriction upon the redemption requests, and Silex and LansdO\\'ne would ha,-e been C'Dmled to redeem tbcir imesuneolS in full. AccordingJy, (he effect of (his is tba( the Fund owes, and COnUnues 10 Owe to each of the Appc:llants (he sums Sel out in paragraphs i. and" aoove minus the pan payment. already =i\"OO which arc set OUt In paragraph 97(\") aoove.
The Appellants contend th:!t. in the liquidation of the Fund. the Appdlams are 2 therefore actual WlSe<:ured creditors of the Fund to the extent of these lIfIlQunu;, less l lh~ amounts which have bt:m paid to each of them in pan s.:Ili~raClion of lllesc debts. 5
Accordingly, in such circumstances, eacll Appt:Uant'S primary claim A. for the 6 differroce between what Lansdowne and Sile.\ would have received. had the g~le 7 not b«n imiXlsW, and what they did actually receive, mUl;! succeed, and the 8 OffiCIal Liquidluor is obliged to admit the Appellants' proofs of debts in full in 9 respect ofth~ claims. 10 POSIT/OS Of' TIlE SECOSD RE.Sf'O.\D£A7S 11
llIe Second Respondents submit that s.37 of the Compames Law (2007 Itevislonj 12 II 14 15 16 17 18 19 20 21 22 2l 24 25 26 27 which was in force III the material time. provides II. oompJCle answer to the Appellams' case. Section 37 of 1h" Companies Law deals wnh Redemption and purchase of shares and reads as follows: "37, (I) S"bj<'l-',IO .his srClJon, U compony Ilmilcd by shares or {imilcd by guaranr~" am/ hal;ns a "hare capilal may. if aUlhorised /0 do 10 by ils articles of association. issue 5hMeJ ..... hich aFt' 10 be redeemed 01' al't liable 10 be redeemed ar Ihf option of Ih" complm)' or Ihe shareholder. (1) SubjecllO Ihls .<eclion. a company limired by shures Or limiled by guarome" ol1d ha"ing a share caplla/ may. if au/horised 10 do 50 by il5 arode! of associarion, purchase ilS awn shares. includmg any redecmab/~ sharfs, (JI (01 (bl (oj Rflkmption ... ,of shares ma)' be effected in such "'''linn as ma), be I1I1111orised by I1r p"rSlllml 10 Ihc <-ompan,r's articles of associalian .. Pag~ JJ if6/) 2 3 5 6 7 8 9 to II 12 13 " IS 16 17 18 19 2tl 21 22 23 24 " 26 27 28 29 30 31 32 33
The Second Respondcms rely on Ihe Privy Courn;il dcci~ion In eu/ross Global SPC Ud v. SIrQugic Turnaround !II<Ulu I'tlrt"tr:fhip Limited [21HO] (2) CILR 364. and in particular. the dicta of tnrd Mance ..... here he ~l<Ilcd al p<lragraph II regarding •. 37: "" is /I basic pr'itdple of company /aw 1M' capllol subscribed ro a con'fJemy may IWl he rewrned 10 shllr"hold~rs orhu,..;se Ihu/I presc"l>ed by WJIUle. &clirm 37(1) o!rhf CompIJtlies Law ~rmilI 1M iss" .. by /I company of sharel /iahle to be redeem~vl ul Ihe oprion 0/ Ike company, or sha,eholder, ana •. 37(3)(c) goo.< 01110 pro'"ide Ih'" "red~mpl;on of.hares may be eff~I<!J ill ,'wei, maimer ~ may be oUlhoriud by or pursuant 10 Ihe comp''''y', "rlie/e. of a.'socialion .. II is 'Il1C011lrOl"t'rsiailhUllhi,' meanS thai Ihr muMe' In .. Mel! any r<>tiempiiOll ""'Y I>e effected must IN o/llhorisro b)' or purSUllf!110 Ihl!! arlicles of a,socilllion. A.I OO"'fr u/1d IJa,·;~s obsen-ed ;/1 I'rinciplts of Modem Compa/1)' 1.11 .. ' (i'" Ed) 2{)(J3. aI 248: //1 re/alion 10 similar, olheil n()/ Idenrical. prm·i,iol1.< I" rhe E"glish Companies Ael 1~8j . scelion J6O(3). "/n ord~r 10 proleel Ih" ~'harehQlders "'hose ShlITCS are 1101 10 be redeemed Ihl' lerm;' and manners 11 Ihe r~demptiOl' muII be S'"' 0111 inlne con/pany '$ arlide~" ,. lord Mance continued at paragraph L 7: "An)" power 10 Wilhiluid puymenr uf Ihe redemption proceeds "JlW be aUlhorised by or P''',<lwm 10 Ihe articles of a;·;·oc;ali/JII. The board I",dcwvod Ihi. /Q ha,oe been ullimolely COII/mon /lrOlmd be/ure il. /n un)' n"nr. il fal/",.,s fram Ih(' lerms uf seclioo 37 of Ihe Coml)(JI1ies Law, and" remllim W. Iher(j"'"", d~spile Ih,' wb$~r"JliOI1 (Jgreem~f!I's gl!l1eroi N!fu,'nc~ to 110.: subscriwiOlI being made. lIl1d UI1)' share,' ofrhl!! cOII/pany urI' ' I'bscribed bei"g held ."bjecr to rhe lerms "nd comillions of/he CEM ,. Uading counsel for the Second Rc~pondcnl5 submits that •. 37(1) plIlVidc.s thai a Company may issu~ rclkcmablc share. if authorised to do so by ils Atticl"" and further rei ies on s.J70 )(c) "hich provides that redemption "muy be effccl<"j 111 such mann~r ami "p"n "lIch term_' as may he /llllhorised by or 1","''''/1/ /Q Ihe Comp''''''', Articles:' 2 l 4 , 6 7 8 9 10 II 12 Il 14 " 16 17 18 19 20 21 22 2l 24 " 26 I""
Mr. Collings Slales that this is n complete Slatutory code. and a mandatory one 15 Lord Mance in the Privy Council observed. Mr. Collings submits lila! its purpo~ is 10 enshrine the basic Company Law principles of mairumanr;e of capital. proIec\ion of sharclloldCT!!. and transparency of the oomp,my", consutmion. Consequently Mr. Collings submits that it is not Ih=fore possible \0 agree matters concmling rcd<:mption "ruch are OOlside the pro"islom in the Articles deahng with rtdemption bttau!ie such would be outside the statutory regune and unlawful. Put simply. it is not possible to "conlmC! OUI of the Companies Law. Leading counsel <Ira",. the Court's attention to the fact that Lord Mance dehered his judgment in Culross Global SPC Lid I', Smm·g;c TurtlortJIlltJ Masur Pam,u~l,ip Lim;u"J On the 13'" December 2010, which was only five days after he had given onc of the Supreme Court judgments in Progrl'ff Prt>~"'" Company Lim/led ". Moore [2011)1 W.L.R. I at pag.: 13. The Second Respond~\IS contend that this is an uuponaot recent auihonty on the maintenance of capital. and on dIStributIOns amountlO& to a return of capitsl being unlawful and ultra "ires the Company. L<:adrng couru;e! for the Second Respondenu contmds thai II iii significant that this seclion comes in pan IIJ of the Companies Law (Distribution of CapItal) and is directly concerned with the maintenance of Carlita\' In Frog,,",! P,fJpel'fj' Lonl Walker, (with "'hom Lord Mance agreed). refCl'1'<"d to the Court of Appeal judgment 8t parngmph 15 On page 7 I!Ithe case: "PPC'S c<lse liS finally fo,mulmed aI firsl inslonct!, relil"li .... on "'hal Mummer)' U refirred /0 III pil'" 23, as "Ihe co",mon law nile": "The common law nile d~,'ised for I"~ prol;:clio" of Ihe credi/Ors of Il company Is well sCllled: a diSin'bulion of a compl1ny:' I1ssers 10 a s,"""'holder, /'Xcepl 10 lu:cordllnce "llh specIfic SIII/,/lO'y procrdures s"ch a.f" winding lip oflhe comp"'fJ'. iJ a re'''Tn of capilli'. which is "nla"fi,1 ,md "II", vires Ihe Campan)'''. The rule is PageJjof60 I 2 3 5 6 7 8 e~senrially U }IIt/ge·made rol<:. ulmruf ". old a$ compally la .... Jl.felj derl''ed from Iilefime/amenral p,,'nciples embodied in rhe SlalmeS by which Parliament luIS pe .. milld rom{XmkS/Q N incorporolc'tl .... 'ilh IImiled IilliJilily." The Second Respondents I'd)' on Ihis dicta and funller mamtain thaI thIS is e:utCtly why me principles IrC carefully prescribed. and in·roads min Ihe maintenance of ,apilaJ m~t be strictly followed. The Second R ~pondcnts submit thaI s.37 is therefore an imponant statUiOry code which needs 10 be adhered to rigorously. 9
Cons~"<Juemly, the Second Respond"IlIs ... bmil that, from wbat lord Mance slIIled to in ell/rOSS Globol SPC Ltd ". Srr""'gi~ Tuml1t'O.md M a)'fer P'U1Mrshl'p Limited. II it is therefore clear thalli.37(3)(e) requires (balllN: manner in which any redemption 12 may be effected must be authorisro by or pursuam 10 the Amc1es; and the t<"ITIUi II and manner of redemption must be 5/:( OUt In the Articles. To suppon this propo»ilion tht: Second Respondenu rely on Ihe Eiij.h!h Edilion of GI)"<er and. " subnu! tha! the reason these must be:;.et out is so that "aI/would kno .. the ,,,w/ion" 16 and to p~e<:t the otlIcr shateholder:s and ind~ creditor>;. 17
The Second Respondents submit that the Articles do no! have: 10 provide for 8 is comprehensive and complete code. WI!h all lhe precise terms of redemption sp<:lt 19 out. The Sc:cond Respondents submil that the IU\Swcr is found in the Aumalian cast 20 21 case. the Supreme Coon of South Australia was dealing with sections 120(8) and 22 120(3) of the Companies (SA) Code. which is re:levam for our purposes l:>ecause 2l •. 120(3) cOITcsponds with 5.37(3)(c) oflhe Cayman Companies Law. namely that "shw"J shall nOI be redumi'd (0) .:'CCcpt on JIICh terms (Jnd in such manner us 0"" 25 pro"ided b)' Ihe Anjc/ ....... Pagd4o/60 1 108, O'Loughlin 1. proceeds to address both s.ections and says at line 13 On page 23: 2 3 4 S 6 7 8 ·' ... il is incumb<'TPI on Nomwndy 10 sotisfy the corm thai il!< arne/ill "s~ffid~nll)' $tl Out" Ihe ter"'l!< of redeml'tion UM//lhe nl/JMm'f of redemplion as required /;y $.110(3)(a) .... . . The Second Re~pondents highlight that this i~ a slight addition to Lord Mance'li requuattenlS in Cu/ross Glrtba/ SPC Ltd ~, Strategic Turnaroum/ MQS1er Parlltenhip Limited thai the Arttcles mUSI SCI OUI lite 1cnt1S and manner of redemplion. 9
leadmg Counsel ,-"Ues upon O'Loughlin J"s dicla. "'hich is nol to expeel a 10 Company 10 SCI OUI aU the inflexible details," lIS ArtIcles because such "'ould be 11 unduly ~triclive. At line 19 on page 25 O'Loughlin J. applies the "Ii'i/fidmlly set 12 OUl" lest, and refers at lines 48 and 49 10 inte-rpmations 110 lIS \0 "gll'e commercial IJ effiCllC}'." 14
Leading counsel fOtllle Sewnd Respondents refers to O'Loughlin rIO Judgment at IS 16 17 IS 19 page 16. where he Stutes at lines 3-5: o company should be fn'<' /0 d~ol "11h ;15 shareholden by negol/aling s~bJidiury terms as 10 mleresl ,meso dales of repayment. /he mechrmics of an option ond Ihe Jjk~." 20 Il l. Mr. Collmgs does submit lhal s.37 of the Comparues Law read wnh lite Articles of 21 ~ia\ioD. does entrench rightS 3l; follows: L The Company can only issue redeemable shares if authorised 10 do so 23 by it~ snld es - s.37( I): P"gd50f60 ll. A Company may then redeem shares (i.e. purchase its own ilhares) but 2 only ifBUthori~ed to do so by Us Anicl~ - ~.37(2): ) tn, Both the!;e provisiom are subject to this ...aion. i.e. subject to what 4 follows which, for present purposes, is s.37(J){c); 5 tv. Section 37(3Xc) provides (as judl<:ially interpreted) thai the manner of 6 redemption m~ be sufficiently S<:l out in the Anid.",. 7 To pUI ;tlUlOthe-r way, Mr. Collmgs submits that these prm~sions muSt be complied 8 "'jth for there 10 be 8 lawful right of redemption: if they are nol, elth~r there i~ no 9 such righl of redemption; or any arrangemenls which are comrary to these 10 provisions are unlawful and ofne effect. II
The Second Respondents ta~e issue with the Appellants' contention that there is no 12 Offering MemontIldurn, and that to have a draft PPM is nol a proper and effect".., 13 Offering Memol1lndum 14
The Second Respondents submit that although the PPM may be rnar~ed "draft" it IS can, nevenheless. be effect;ve and al"loo upon. 16
The Second Respondents submit that the PPM was an Offcnng Mernorandtun as 17 18 19 20 21 defined in Anlcle 2(a){xiv) which IUds: •. The Pn\'I1le Placem"nI Memorondllm aT ollwr affcring docwncnl pllfSloam II) .. ,.hich, ~"d on Ihe termS and clmdiriot1!! of KMeh Ihe Redeemabl~ Shan'S of each C/ms are offered for p"rchase ....• Pag' J50fM
Th~ Second Respond~m~ submit that PW engaged Mr. MacKay to aCl as her agent 2 and to ensure that her in\csurnml!l w~re made. Th~ Second R"'pondnllll ",bmil thai 3 the m\"estmenl§ made by Ih~ Appellants were mad~ on Ihe ba.is of the malerial S"'lt 4 under cover oflhe email dated Ihe 19'" April 2005 from EGH, which includl'd the 5 PPM dated April 2005. the Anieles. and Ihe subscription form, which included the 6 follow 109: 7 "As ;111"'.'0101". I hereby expressly dec/ore lind ol'ProW! Ihefollo"l~g (I) I hm'i g read a copy ojlhe laresl ProspecllL"{ojlhe Fund ..... 9 The Second Respondents therefore subrrul that the inveslments made by Silex and 10 Lanwo"l1e were made on the basil! of the PPM. which Ih=fore con'!J1utes the II OfTenng Memorandum. and lhat lhe Appellants and Ihe Company all proceeded on 12 this basis. 13
AccornlIlg.iy, Ihe condilion precedenl in Aniele 5{m) is therefore fulftlled and the 14 power 10 impose a gate on redemptions is pnma faCIe a\"3.ilable. 15
The Second Rc.ponderus highlighl one poim of detail: Matador was incorponued 16 17 IS 19 20 21 22 23 118 on the 18'" April 2005 and on the same day. ils Memorandum !lIld Aniele:; were regislered. These ArtIcles aecord wilh the DnlfI Anieles. On the 28· March 2007 it ,,-as ",saked 10 amend the Aniele:; and adopt new Articles. The effect of the amendment WilS essentially to change the denomination of the shares from Euros 10 US dollars. 10 change the definition of Redemption Day. and to add a new provision pcrmilUng Lhe directors LO SCI loclrup penods. The Official LIquidator exhibils the original Atlic1es, and then the newer March 2007 Anicles of A5s0cialiolL For the purposes of this Judgment, it is dear that Ihere nrc Pagd7of60 2 no m.illenal differenc-es bet",,,,,,, the April 2005 Anicles and the March 2007 Artides. 3
The Second Respondents contffid tMlllle agr=eru between PW and EGH was a 4 , 6 1 S 9 JO 11 12 Il .""ret agreement and is 001 referred to in the Articles or e'l'eI1 in the PPM. The Second Respondents contend lhal there is no inconsistency between the Articles and Ille PPM. but there is a fundamental inconSistency between the AMIci .. and the secret agreement between PW and EGH. The Second Respondents contend that the Anicles pro\ide for a power to gate redemptions. whereas the agreement ,n priociple between PW and EGH pnmdes tNlllher" can be no such gate in respect of one panlcular shareholder. In suclt a case, and in such a situation, the Second Respondents contend thaI the Articles prevail. Furthermore, tm position IS {J fortiori where •. 37(3)(,,) applies because il specifically provides thal the manner of redemption muSt be sufficiently s.eI oul In the Articles. 14
In any event, Ihe Second Respondents submit thaI Article SCm) d~ refer to the 15 "Offcnng Memorandum" and thttrlorc it identifies tlte docummt to be CQIlSidered 16 J1 and it i~. aft~,. all. n document which will onhnnnly and readily available to the Appellants and 10 all invc~ton. 18
The Second Respondents pOint out that in CUIMSS GfI>bal SPC Ltd v. Sfrolegie 19 TII",a,o""J Maste' Pamll'rshl'p Limiled Lord Mance had no difficulty with the 20 21 Articles ref~Dg to the OlTer docwnent. although inc0n51St<m<:y was resol"ed in fa,'our of the Anidcs. Pag~ 18 of 60 I
What the Second Respondents do contend is that the SO:;re\ alll"=ent between PW 1 ) and EGH is 001 suftielently set out in the Articles. UlIlike the PPM. and further. it is not even referred to in the Articles. 4
The Second Respondents ask the question: How can it be said that the Articles 5 , 7 8 9 10 II 124 traditiolLlUy set oUl the manner of ~emption when Ihere is a S=<."I agr=nenl which. the Appellants submit. o"errides the Articles and the PPM, and which dis. applies the power to gate. thereby giving thai shareholder pll'fereruiaJ ~mlpl;on status. Fut1hermoll'. the Second Respondenls highlight the fact thallhe Appellants are not arguing that this could undcrmine the entire ~ernption regime in the At1ic1es. particularly because they have already benefitted subsllUltlally from redernpnons. 12 \ 25. The Appellants argue that the agrument bmds Matador, and therefore the Official 13 14 15 l.iquid.:llor. Tlu:: Second Respondents contend that il docs not bind Matador or the Ofliclal Liquidator. and the agrCCD1<:Ilt is not sufficiently set QUI in the Anic1es. and IS therefore WlJawful and of 00 effect. 16
To put it another way. the Second Respondents' position is: For a fundamental 17 pmvisK>n concerning redemptions to be eff«:tive. especiaUy one which 18 i9 countermands the pro"isions of the ArtIcles and the PPM. s.37 sa)"S that It mWa be in the Articles themselves. 20
The Second Respondents re·state the preliminary question as to .... hether the 11 21 Agreement between PW and EGII bind:;; Matador and \herI:foll' the Official liquidalor. Pagd9vj6!J
The Second Respondents' leading counsel poims to paragraph 16 of the Appel"'nt!;' 2 Skeleton Argumcm aruI !;tate that the Appdl3./Ui c~ly submit. 3 "Only 1"0' F,md, and nOI an individual shareholdu in Ihe Fllnd. CQn em;!. into a 4 legol{~' binding/mil 4/eclil'C agreemelll "pon s"ch terms as /hese:' 5
The Second Respondmts oontmd that. for an Agrument to bmd the Company mUSl 6 7 have emered ,ntO It. and for a Company to enter mto an Agreement n must be effected by someone with the requisite authority to cotrnnit the Company 10 it. 8
The Second Respondena take issue with the Appellant'S submission that EOH had 9 10 11 12 il 14 15 16 the relevant authority. The Second Respondents rely on the recent House of Lords decision in Criterion Properties PLC ,'. S"oljoNl UK Proptrties LLC [2004J 1 W.L.R. 1846 and .ubmit dUll ther" can be no actual authonty to do something unlawful. Additionally, it il oot the case that apparent authority can be rched upon by somebody "00 knows that there is no actual authority (and peo;>ple an: taken to know wh:n 's lawful). Thus.. the Second Respondents !;ubmit EGH cannot bind the Company to a redemption regime which is OlIlJid" the statutory scheme. and o~ wrucb is different from thaI enshnned to the Articles 17
The Second Respondents also argue that if a Company mak.." a misrepr=tation, I' 19 20 21 22 then the injured party may well ha,'c a claim to damages. Howe,·cr. the Sa;ond Respondents submit that the application of the Company's Articles cannot be overriddl'" by any secret agreement which oonflicts ,,"ith them. nor can 5.37 be overridden by an Agrl"elnent or an estoppel. Leading counsel on behalf of the Second Respondents submn tha! it is oot possible!o agree nOt to be bound by, or to Pugr 40 of 00 l seelc \0 comracl out of. tile statutory provisions of the Comparues Law. and tlus is u jon,or; whm it comes 10 provisions concerrung maimmancc of capnaJ. 3
The pre:rent case is concerned ""1111 an AgreemeIll allegedly made by PW with • j Matador. conferring prefcrenual slatus on PW's ~emption n.'quesIS. 11tis IS an Agreement wruch cannot sland and which could nOlo in any "'\'enl, bind /Ilatlldor. 6 U3. In >I1IIUTIllI')' Mr. Collings submits that the agreement bel .... ",," PW and EGH i, 7 8 9 10 II 12 Il 14 15 16 17 " 19 inCQnsistenl with the AMlcies and it is lhe Anid"'! which prevail. Mr. Collings further states 1hal this ~foniori when 5.37 oflhc Companies Law applies - bemg an imponanl statutory code dealing with the maintenance of capital. Fwthermor .... the agreement is 1101 sc:I out in the Anicles. it is not rcferml to in the Articles. and it is ",holly inconsistent WIth lite Articles. The S«:ooo Respondents contend that the agreement is unlawful and of no cITe<:! alld thai the Agreement between PW and EGII. if there is in fa>:t such an agrecrmTlt, s~1;s improperly to fe11er the e.\ercise of the directors' discretion, To put it another way, Mr, Collings contends mal the purponed agreement is a se<:reI ammgemem creating preferential redemption trenlment for PW - effccti,-ely giving PW a special clau of :;hare with enhanced redemplion rightli. The So:cond Respondents contend ihalthis is Impermissible and of no effect. Tile LlQllOATOR'S POSITION 20
The Appdlanls lodged proofs of debt in the Matador liquidation claiming 10 be 21 II OJ redeemed shareholders CTLlitled 10 eredilor claims pursuanl to 5.37(7)(a) of the Companio:s Caw (2011 Revision). The Liquidator panially rejccted the proofs of debt on Ihe basis thaI Matador had galed and suspended a ponion of the 2 SilexlLansdowne redempuon requcst~. $w;h thai they rema,n sharehold= and oot creditors ID r(spec! of the gated and suspended poniolU. 3
The Appeliams now appeal these partial rejections. arguing that they ougtl1 no! 10 4 , 6 7 8 9 be bound by Matador', gating and suspension provisions attaching to their ,hares because represcruatlons Were made by EGH, who W!IS a director of both the Appellant Lansdowne and )'blador. to PW, who was a shareholder in Lansdo"'[\e and. apP"fC'I'tiy. and indirc:<:l beneficiary in Sile_,; 10 the dTect Withe Appellants would IlOl be bound by the subKriplion documents they duly e:<ecuted, Matador's Anieles of Association. or Matador's Private Placemem Memorandum. 10
LC.:Iding counsel on behalf of the Liquidator. Mr. Nigel Meewn, ",'!lnlams lhal the II 12 II 14 " 16 17 18 19 20 21 gating and suspension pro\isions of Matador's Anicles apply to tile Appellants becauoe; " , i'unu3m •. 37(3)(,,) of the Companies Law, a Cayman Islands Company's Micks go\"crru; the Ro:d=plion pro<.:eu. and for that reason alone the Appellants· appeals fail; b. Even if that were not the case. th~ specific alleged representalion:;; made by EGH do not suppon th~ Appeals advanced by Silex and Lansdo"ne: and c. Even if EGH's representations did suppon the conclusions advanced by the Appellants, [hey are nOl capable of defealinillhe e.\prc:sscd wnllcn agreement between Matador and the Appellants Or Matador's ArtIcles as a statutory contract under 5.25(3) of the Companies Law and the applicable case law,
Mr. Mc:eson submits thatlhe e~= of the Appelhul1s' arguments iI; that they 2 ought to be relievN of their wrillen and statutQf)" contracts because they were ) executed in contravention of the wishes of the,r shareholder and ostensible .:I beneficiary. PW, because PW .... as told that the Appellants wowd not be round by 5 these oontl1l.ctll. 6
Mr. Mo:eson submits that tius is a maHer bet,,·c:en the Appellants and PW and not 7 8 one open to the CQtp<mlte ""tilies to a,·oid the-ir Ie-gal obligations as ag3J.nst Matador. 9
The Liquidator contends that he is an officer of this Court, and he has a dUly 10 10 " 12 preserve the assets of the Matador Slate - but only to Ihe extent that he objecm· .. ly and mlpanially determines lhat doing so is strictly in acoordance ""lIh Ca)man Islandl; law. 13
The liquidators position IS that there was 00 awttnlcrll between Matador and the " " Appellants - Sile., and Lansdowne - thaI could have invalidated Matador·s power to gate and suspend roocmplions as ..... ow In its constitutional docwnems. 16
Consequently. Mr. MeCSQn submits (In bchalf of the Liquidator that the answer [Q 17 18 all of the four prelimmary questions presented by the Appellants. in respect of these preliminary issues. is 00. 19
Mr. Mceson further submits that on the evidence before the COWl in this 20 21 22 Application, the only connection thaI PW has to the panics appears to be as a shareholder (If Lanid(lwne. The Liquidator C(lncedcs that the Coun may infer from the evidence that PW is also an indirect beneficiary under the (lroru:e Trmt, bul the liquIdator contends that !here IS no allegation or eVIdence 10 support PW havUlj! 2 any capac",y to ""tcr into agr=""ts on behalf of tilc Appellant, Lansdowne, or the ) Appellanl Silex. or indeed. otherwise. 4 1_13. The Liquidator points out that the AppelJanl, Lansdowne subscribed for .hare~ , 6 7 8 pursuanl to a subscription form e~ecUled on the 24~ April 200~ by EGB and Mr. MacKay on behalf of Lansdowne, and. the Appellant Silex subscribed for shares pursuant 10 a subscription form executed 00 the 10· May 2005 by Mr. O'Bri"" on behalf of Silex. 9 \44. The subscription forms executed by the Appellants $Iated the follo" i08: 10 II 12 Il 14 "[ have a fWd a copy oflhe lau'sl ProSpeclUS aflh" Fund and m:ei.'eJ a copy of II,,, 100esi ami/obi" fl~ondol ""por/£. I am fully a»lJre of and u"d~r5m~d Ih~ financial risks assodaled "ilh a subsCription /0 lhe FUJ1d and I accept Ihol ntIlrkel j1"C1WJliOlt$ may lead 10 a lass of all or porI of my capilal. HOK'ever I confirm Ihal/his inW!J/mem is approprime for my ne"ds.''' 15 \45. nle Liquidator says, whdhc:r II is described a.! a PPM Or a Ornft PPM. there is no 16 17 IS 19 20 21 n 23 other document that the "Prospectus of the Fund" could reasolUlbly be. other tIwl a Pri"8tC Placi!lJlem Memorandum - which i. uuached 10 the subscnptlon ronn, inCOrpOllltin8 the t~nns of tile PPM by refcrem:e. The Liquidator maintains lhat the PPM was pan of the package of documents auached 10 the ~mail from Mr. Ddlacker to PW and Mr. MacKay, and which also included the In''estor Pack. the lm·estmnlt Managcmcru Agreement between Matador and Matador Manasement Ltd .. aad the Memorandum and Anieles of Association of Matador Mana8<:ment Ltd. Pug., U of 6fJ 2 J 4 5 6 7 8 9 10 " 12 13 14 15 16 17 18 19 20 21 22 13 24 '"
The L,quLdator submits that by signing the subscription agreemcnts. the Appellants nOI only ~d,nowl..dged the c"i~lrncc of the PPM as al10cbed 10 the email and agreement. but also e~pressly indicated that they had read il. The flISl page of the PPM Ilated the following: "The Shllfl!S of .lta/ador ... rejcnYCd 10 in Ihis }d"mora"dum, Or<! offtred s(Jltly on Ihe basis of ,he i'1fontWtion contained herein. In conncctirm ,,;tI, lite offer mude hereby, no person ;s aul/ron·sfd /0 gi'''' an,' in/ormation or I/) ",uk u,,), represerf/iJlioTU Olher lhan those conUJmed in litis Memorandum, and "ny purchase made on rhe ba.J1s of Slorcmerr/S or rcprescnlarions 'la/ conlained in or incoruisl"n/ " 'i/It the info,mall'on colliaincd in litis Menwr(lIIdum shall be solely 0/ Ihe risk of /I,,, p,m:haser." Leadmg cOWlScl on behalf of the Liquidator maintain> lhat it i, clear from !hi, Statement that 00 one. mcluding EGII. i, authorised to mnke any repr=tatioru; inconsistent With the terms ofth" PPM. Fwthmnore. Mr. MttSOn submits that the appellants entered into the subscnpucm agreement wlely On the basis of the information contarned witiun the PPM. including both gating and SU'lpension Mr. Me<:son funhC'r submits that any representations made by EGH to PW were not authorised by Matador as they w.,-e inconsistent with the information pro'ided within the PPM. nnd the~for<: cannot be relied upon as binding. Consequently. the Liquidator submits that the answer to all of the qUC$!l<IIl> ""ked by the Appellants in respect of these prelimmary issues is 00. The LiqUidator maintains that redemptions may not be effected in a manner that is 001 authorised by tIu: ArtIcles of Association. Matador's Ankles permit its I , dtreC10rs \0 impose gating and SltS~'ons. and do noI authorise mlemplions \0 be aCCqltN in comra~enlion of those gates and suspensions. J
Mr. Met'SOn submits thai Articles arc a statutory contract and not subjec1 to oral 4 , 6 7 8 9 10 I I I , 151 "ariation. and rcltes upon 5.25(3) of the Companies law. Articles are not a simple party romrael. They arc akin \0 a C(llJect;,'c agreemem thaL ernlcs colicct;"" righl$ and obhgauons as hl.''!w",," the Company IIIld all lIS shareholder,;, and its shareholders ,'nta se. [n addition. they are regi$(eml documents upon "ruch third pMies are entitled 10 rely when purdlllsing shares. Funhmnore. Mr. Meeson submits lhat tH"lI iflhe allegations in WUlen4 amounted 10 reprl'Set11alions from Mutador 10 the Appellams. they were inconsistent 'nth )'l3tador's Articles, and therefore could not chllnl!e the rc:demplioD and suspensIon process SI't out In the Art,des. 13
To put it anoth.". way. Mr. Meeson subnUls that. III the Skeleton presented by the 14 I , 16 17 18 19 20 21 22 23 Appellants, the Appellants argue thai an analogy to a "Side Letler" oUghl 10 apply 10 the represenlalion.! allesed in Walers4. The Liquidalor'~ rt'Sponse 10 I!li~ argumenl is Hal no law is presenled 10 e5lublis!l thai "Sule Leuers" are legal and enfo~eable. no maller how common they are alleged to be. In an} event. the Liquldalor could nol wah'e .saling and suspension provisions in rt'Sp'..,t of one s!larellolder only. To put il anolher way. 8 term of a Side Letter agrteing nol 10 suspend a gale would be 10 agree 10 lhe opposite OfwMt is expressly conlamed ID Ihe Articles. and 001 merely an Agreemenl 10 exercise a disci't1lCln m a CMaID matUler. This would amounllQ a malerial misrepresctUalion in Ihe Mide:s 10 a Ihird party PW'dWlOg Malador silares. 2 J 4 5 6 7 8 9 10 11 12 Il 14 15 16 17 18 19 20 21 22 2l
''''.
Finally. AMide 12la) ~s ()Ut th~ pn.!,isions for the delemUMlion of Matador's net asset value. which states as follows: ~The Ncr As.<el Value of the Company sllMI be ca/cu/cHed "'I acr:r>rdoflce wilh the Offi;n'ng Memorandum as at each Valuation Day.foreoch Class (or at sudt olher limes or 0" 5",11 Qllta Joys lU" Ih~ Directors or Ih~ir agcnI.f may delumine) lind mcans Ihe IOwl assets of Ihe Company utrriburoble 10 the re/e""nI Closs mclin/mg. ,,;/hoUi luni/omln, all cash, c{Jsh €quim/ems 'lIId Olher secun'rie.s (each millcd at IlUJrkel \'OJue or mher.,.oi,se herein pro\'o'ded) i.:ss the 11110/ liabilities of the Company ol/n'w/able 10 tire reie''''n/ Class, determined as herein provided or olhe ....... !: by ar (lII behalf ufllle Directors in good flllA in aCCOroullce wilh Ihe refe .. ",t gefleroll.v accepred uccOllllling principles or siondnrds applicable /0 Ihe Company ronsi$lemly opplied under Ihe occnlil/ melhod of (JI,:coIJming:· The Liquilbtor maintains. that Aniele 12(a) relics heavily on the PPM for the imerprctation for the provision! for calculating the net a$Se'l value. It is suhrruued that the only method of calculatmg the NAVis by way of ref=e to the PPM. Without its exist"""e, the NA V ca1<:ulaled for the purposes of Silex 1IJId Lansdowne's gated redemption "ould be unauthorised. In summary. the Liquidator"s submissions are as follows:
The Appellants were provided with the PPM as an attachment to the subscnption agreemrnt. and an al1achmentto the el"lUil oftb.: 21- April 2005. b. The Appellant~ signed the subscription agreemmt indicating thatth~ had read the lenns of the PPM , ) 4 5 6 7 8 9 10 11 " II 14 IS IS6. 16 17 IS 19 20 " c. The PPM lunilS aulllOriscd representations 10 those which are consistent ",Ih Ihe 1<mnS of the PPM. d. The 'epreseruations oow relied upon by Watef54/PW arc: inconsistent .... ith the PPM and crumm be considered 10 be bmdmg on Matador. c. Therefore: the answer 10 all of the questions asked by the Appellanls in rc:Specl of the preliminary is",es is 00. r, Funher. if the Appellants are correct. in that the PPM. as provided, does 001 apply to the Anid .... then any redemptions made would be unauthorised. Also. wilhoUl rerermee to the PPM. Matador is unable 10 cakulate the NAV. g. As such, the suspcmio;m lD llal1Dg provi"lOlIS of Matador's Aniele. bind the Appellants. and the Liquidator CantKll be obliged 10 accept the Appellant>' proofs of debt that arc prt'tlliscd upon thc Anicles ~ binding them. CO,\CH'S/OS £GH 's R£PRf:1if\TATIONS AND THE AGRE£I/E,\T IV PRIVCIPLE The Appellants rdy hrovily upon the following repremllations made by EGH 10 PW whith. !he AppeUanls submn. allo"'!he Appellants. Lansdown<: and Sile~. not to be governed by the gating and .uspellSJon proviSIOns contamed In the Anlcles and relied upon by the Rnpondent: j. An oral representation made "during Murch urnJ Apn'/ , .... 200~ !hat EGH told PW ..... thM PI!' sho,,{'} b.: uh/e /0 willrdruw us much rnoni')' us (she) needed ewry qlmrter.": Page 4/J of 60 2 ] 4 5 6 7 8 9 10 II 12 1] 14 15 16 17 18 19 20 21 22 2l 157,
n. On or about the 21" Apnl 2005 EGH said to PW thaI .. __ PW shl)l.Jd nO/ concern (hersdfJ with Ihe:!/! draft dQOUflenlJ as Ihe lams of (her) ml"CSlmcm inlO Mamdor wo"ld nm be governed by lire slrict IN'ms of Ihe "ocum~ms ,,-!rich ,muM gow.'m other coII/lImp/meJ (third party) ;"'",SIOTS' im'eslmenlS in Ihe F,md and these druft docu",ems ".,,...,h,, :llamiorti F'llld uoculI\(!nlS imended for fillUTi! im'eslOrs."; llI. The e.,,:cutcd docwnem that describes itself as .. ,. an agreement In principle between PWand EGH" whereby ,he t><v agr~e "that thry would draft and ~ign 11 sh",..,hofder agreement b<>rween them.. "; 1 agree with leadmg counsel On behalf of the Liquidator. that il is un<;!ear whClher the representation is made by EGH on behalf of Matador. which was 001 incorporated until the 18'" April 2005. or as a dlftttOf of lansdowne, or in some other capacuy. The statement that PW "should be able 10 ..... ithdro .. ·os much mOlle)' us" .he needed. does nO( amoum to a rep=mtallon that the Appellant" redemptions would nev ... be guted or suspended. Indeed, as Mr. Mreson submits. it could also be read to mean the <:lC3Ct opposite. meaning that PW should be able to wilhdraw h ... funds. but there would be 00 guarantees. The lirsl representalion and the second representation r<=ferred 10 in paragraph 156 were not represemallons made by Malador 10 ellher Appellant. The dllcclOl'S of Lansdowne and the direclOrs of Silex eJlccuted d""'Umml$ that could never have r<=fle.::ted thaI vie". As the Liquidiltor has ITIOIlntamed, these ar<= merely repl't.'SC1Itations by EGI!. who is a director of both Matador and Lansdowne to I'W 2 3 , who IS a shareholder of LanWown~, and possibly a brneliclary of S,lex; and ye'!, the Appellanl~ proceeded \0 e.~ecule documents lhal conflicted with lh~ rqlrt'Sallaliot\5. Furthermore. the oral represcntatiot15 made by EGH would appear 10 pre-date the executIon of the subscription forms by both Lansdowne and Silex. 5 160, In any e'ml, both Appdlanls tII.ercd tnlO wrineo aWC"'"etllS wilh MUUldor 10 6 7 purchase !lhares which " 'ere the subJee, of both gating and SUSpenslOD pro\'SIOns comained bOlh in Matadors PPM and irs Articles. 8
The ,,'ording of the Agreemem in Principle belwcen EGH and PW would appear 10 9 10 11 12 13 " 15 16
Dc an agn:ernem between them to enter into a shareholder's agreement a1 a fuum, dale. t agree with leading C(lUnsei for the Liquidator, thaI the Agr~mem in Prin<:iple does 1101 appear \0 contain any terms thaI are incoO$JSlenl wIth Matador's right \0 unpose a redemption gate arnLor a suspensIon of paymeol of redemption proc«ds to the Appellants.. The Agre..'m<.·m in Principle is only an agrcerrn.nl between EGH and PW. Neither of the AppeUanu;. Silex or Lansdowne. Wnl: pan'cs 10 the Agre<.."flltT1t in Principle. 17
The COi.lrt has some sympathy for PW be<:ause. clearly, she was induced by EGH to I S place her funds w,th the Fund. Al the lime she was discussing her investment with 19 20 21 22 EGH. PW admitS she was unfamiliar as to Ito", a Cayman Islands Hedge Fund opcrnted. and she rched upon what EGll and Olaf told her. For example. sh<: was told thaI she ""ould be a dirCC10r of the fund's lDvcstmenl manager and emitlrd 10 fees Po1yablc to this entilY. Subsequently she found OUllha! :;he wn never a director PngdO of 6(1 2 of the Fund's investment management company. nor was she paid a share of Ille m:rnagemt"fll f~ to which she fell she was entitled. 3
Furthermore. PW obviously relied upon the advice of Mr. MacKay - when she 4 , 6 7 8 engaged him to advise Iter In connec1ion "",III agrtting lhe final ronn of the documentation lhal would generally be applicable to !he Fund and to all "t/urd pany" '"Ve5tmems lhal wQUld be made In the Fund. h IS clear from the eVIdence In Waters4 thai PW relied 011 Mr. MacKay 10 finalise the final docum01ltaliQ!l with EGU. 9
PW lell il to EGH and \0 Mr. O"wugIIJin \0 amloge for Lansdowne to be 10 II 12 IJ incorporated and for the Bronze Trust!a be set up, and in the SlIme way. she lell it to Mr. MacKay 10 arrange for SIlex \0 act as Trustee for Bronze Trus1. EGH said IMI Olaf would k""P "an f'Y" Qlu" for EGH and PW. bUI II would appear from Waters4 thaI Olaf had no regular day job. nor was he in need (If one. 14
PW was led [0 believe that:;.he and EGH would also be directors of MaLador. 15 16 17 IS !9 Subsequently, PW round OUI lhal Ihe dm:Clors of Matador were no\ EOH and PW, bUI in fact EOH and Olaf. EOII had indicated Ihntlhe PPM would be amended and agreed between PW and EOH. It appean from WatersJ that there was ne,-er any discussion between I'W and EOII regardmg the PPM or any amendment 10 it and there is 00 evidence before this Coun thatlhe PPM was .,-er amended. 20
The Agrccmcnt in J'nnciple indicate'S thai PW and EOII would draft and SIgn \at 21 22 23 $Omc lime in the future) a shareholder's agreemenl bclw'cen lhem but, regrcllnbly, there is no evidence of any shareholder's agre<:mnlt relating to I'W or of any having bern executed by PW. The evidence is lhat EOH had told PW that the PP!>1 Puge " of 6/} , l 4 5 6 7 8 9 10 11 12 Il 14 15 16 17 18 19 20 21 22 2l 24
and the Ankles were irrrle\'anl. and PW candidly adnUls thaI she did not pay much 3Uenlion [0 this document It is clear from Wat<='! thai PW Jeft it 10 Mr. MacKay 10 discuss and finalise the docum~ntau(l1l with EOH .. Furthermore. there is no evidence th.3t any of lh~ n.1'=e!Uulions made by EGH \0 PW w",e authorised by Mutador. and in any event. the represttllalioru; W .... e inconsIStent wnh the PPM and the Anlcles of Assoclutlon of Matador. PW now realises thaI she was "ny nai", and an unsophisticated in'-estor. She funh<:r realises that aflerlengthy discussions wnh tier anomeys. her in>-cstroenl in a Cayman Islands Hedge Fund is governed by subscription agrerolent signed by the Appellants. Ihe Anicles of Association ofMnlador and the PPM. ]1 is beyond question that the Appellants. Lansdowne and Sile~, are shan:holders of 1>.lalador. They signed the subscriplion agreemeru oW. on the baSIS of the PPM and lhe AfUel"" of Association and lite mve;;tor pack, they became the registered sharehold~ in Matador. Article 9 of lite Articles of Aswciation reads as follows: ··Equitl1ble Imf'l'Sl- exCf'pt as req,lireil by Il1w. no penmu shalllH: rerog,,,m} by Ihe Comptmy as hoiJing 0"1 shan "pon I1ny m'5t. and the Compony shl1l1 not be bound b}· or iNJ compelled in any ""y to recognise eWII "hen hal,ng IIalicc Ihereaf allY equitable. coalin~nI or f"mre partil1l inlt·resl in /lny Shl1n (e~c<·pl only as by Ihese Arlides. Qf by Ill\\,. oll",,...,l:ie pro,·hled. or ,,,,der all order of a COlm of can'pelem jurisdiclion .. or any O/h" righlS in respect of uny Share e.xe<'jJ1 an nllsolute righl /0 Ihc emi"'ty therrofill Ille reg;.<h'reil lIald~r. IIul Ihe Comptmy may in IIccordl1nCf \,";tll 'he law issue fractions of Shar~s up /OfolirdedlfU/l plac~:· Pagdloflj() 2 J 5 6 7 8 9 10 II 12 13 15 16 17 18 19 20 21 22 13 24 25 26 27 28
In the r«en! unreported case of Med'ry' Opponll"it)' F,md Ltd. '", Fin/on M~51tr f'um! Ltd. und Naufi~al Nom;"",,;!; LId. FSD 23 of2012. dated the 21- June 2012,1 applied and adopted the pnnciple SCI oul by tile Coun of Appeal in S."tIflStrflm " .. d NIM OfhuJ ", JOll/UW/l 1997 CILR 192 where Ihe Coun slated in the duro holding on page 193: "1"ile colt/men 10 .... principle 111M ~ company .ms nol obl.ged 10 ,."rognise a trusl ujJecllng lIS shure • ....... rej/ccud ill each company's a~fic/cs of aSSOCiation .... hieh slated Ihm thc company was nol bound 10 N1Cugnise any l!fIuilllbh' in{('res! but ""Quid regard 11 regis/(:rcd shoreholder as being ab.ml,uely en/hied." On the bru;is that It was only SIlex and Laru!downe thalln facl CMcuted sutlscnplion fonus and W~'TC 00\ pany Ie any Bgrttrnent wilh EGH or anybody else, I cannot find any basis to suppon the conlrntion that Ihe agrccmem. ifany, between PW and EGH blllds Matador Or the LiquJ!lalor III relation 10 the redemption requcsts of the Appellams. To pUI 11 another way. even if Ihere wc:re an agrcemem b<:!wcen EGH and PW. there was no agreement between Matador and Ihe Appellan\! !hal could invalidale "'slador' 5 power to gale and suspend Ihe Appellants' redemplio"", ItS set Out in it. oonslilutlonal documcms. Mr. Meeson. leading counsel for the Liquidalor, relics upon •. 25(3) of lhe Compames Law which reads: .. Hlten regislered the wid arl'c1ef of assoc'at'oll shall bind Ihe comp<my and members Ihereof 10 Ihe same exlelll <IJ' if each member had subscribed his nallte and affued his se,,1 IhfretQ, and Ihere lI'f're III such or/ides comained 0 C{)I"nORl On Ihe pan of h1~eif. his heirs, execulOr5 alld odm'nislmlOrs 10 conform 10 IIl1lhe regr..IIII'O/lS cr)1llained in s"ch articles sabject 10 Ih ... LtJ .... ; allll all 1IIOIIi,'$ payable by OilY member of Ihe company. ill purJ"aIJce of lhe (;01lllill01l5 Or r<'gr,IRlions shl,1I be dcemoo 10 be a debl d"e from SIIch member 10 Ihe compllny . .. PagdJcjM 2 ) 4 5 6 7 8 9 10 II 12 Il 14 15 16 17 18 19 20 21 22 2l 24 25 26 27 28 29 JO ) 1 175,
As hali often been cited, Anieles of Association are nOl a simple two-party contract. They are akm to a collect,"e agreement lhal cre3te:s coll""ive rightS and obligations, as between the CQmp.1ny and aU of I\S lirull'l:holders, and ils shareholders inter se. In addition they are registered documents upon which tturd panics arc entitled to rely when purchasing shares. 1 a<X~t the SUbmiSSion of the L'quid;ltor that even if the allegations .n Waters4 amounted to represenlalioru; from Matador \0 thc Appellant.!, that were irn:onslm:m wilh Matador's Articles. they would not change the redmIplion and suspension process seI out in the ArtJdes. As Lord Justiu Stern (as he then was) Slated in Brot/oll Seym''''' S""i~" Co. iu/. ", Oxborougl. [1992] BCLC 693 at 698.099: "Here Ihe company pUIS jOr>l"lJni un 'mplica/ion 10 be deri...,,;, nol IrQ'" Ille /OngliOge a/lhe arrides of associllllOn bill p"rely from cxlrin5ic circumslances. 711111, In my judgment, is a type 0/ implication "Mcn, as a matler o/I"w COli lIel'U succe<'d ,'n Ihe case 0/ anlc/es of association, After all, if it Iwre permilled ;1 ,,'Uuld ifll'Ui>'e the p<lJitian tlUff Ihe different impb'catiolls ,,'Ould 1I0tiOMlly be prusible bet ... een IN! CQmpany and diffa~nt subscribers, jusl as the rompa"J' Or an ill<{I"idual member CQllnot seek la defelll the stamra,)' camroci by reason a/ special clmlfllSlances such a,f misrepresemarion, mistala', u/ldlle influellce and duress, and is forlhermor~ nOlpemu'twd 10 seck a reclijicotirm, neither Ihc camp''''}, Or aay member Can sed to add la or to subtraClfrom Ihe uml$ oflh~ artld~s by I</Iy 0/ implymg a lem. den,oed/rom exlrillsic surrounding clmlfllSlonces. ([II ... ",... permilled In this cas" il would be eqllUlI)' penllisslble o''('r I/Ie specm,m 0/ company 10" cmes, The cansequences .. 'Ould be p,...judiciai ra Ihird parties, lIomely potential shareholders .. ho are emilled 10 1(}Ok 10 and rely on Ihe urtic!es of onociation 0.1' regiSler€J:' 1be Appellants submit that an analogy of a "side leller" ought to apply to ihe repn:wntntions made by EGII to Wall:1'!;4 and PW, If I wcre to accept thai the representations made by EGH to PW - agreemg 10 allow PW to !CCeSS funds al any I 2 3 , 6 7 8 9 10 II 12 13 14 IS 16 17 18 19 20 21 22 23
time - It would be the 0pp05ile of what is t.\pressly contained in the Articles of AsSOC13tion. and the opposite of thaI which go"ems the subscriptIon agreements entered inl0 by the Appellants with Matador. The position is dear and unequivocally Staled by Lord Mance in Smlleg;c T"",ul'O,md whe1l quotmg from Gower and O .... ;s"s Pr;ltcip/es of Mm/cm Comp<my La ... ~ Ediunn: "/n Qroer 10 protitct Ih" ,"aNno/den: whose sh",." .. u ...... nol /(J be reJum.·d. the 1,:nnS and """,ner of Ihe redemption mIMI be Sfl 0111 i" Ihe company's ),rticles, .. The Agrttment in Principle between PW and EGH was IIQ{ set out in the Anicles and cannol vary or invalidate the ,\r1ides of Association of Mallldor. If PW and lhe Appellants had intended the Appellants \0 be millie<! \0 rrocem their lIWCSlmrnl. they ,lIQuld have ensured thaI such provision granting thaL entill..,.""m was inserted in the AlI1des. and further, the AJ'PI'UIUIlli ,hQuld haw executed a wrillen agr«111enl with the dim:tOl'i of Matador thaI the galing and ~Wipcnsion provisions in the Articles do DOl apply 10 lht'lll. The Articles ga;'e lhe direcl0rs po"'er to gale and suspend redempliom. and thL"", ,~nothIng oomainro In the PPM Or the Articles to prevent them e~t'TCising 1his POW<:l", In fact, the pro,ision. of tbe Articl~, as read with the PPM. specifically empowered the direclors 10 impose the gate and susperu;ion they subsequently ,mpoosc:<l. Pag~HQfW 2 3 4 5 6 7 8 9 to II 12 13 14 15 to l7 18 19 20 21 22 ISO. 181
s eCT/Q' J7 OF TIlE CQ.lII'IM£S LAII The $..cooo Respondents and liqUIdator both submit thaI Section 37 of the Companies law (2007 Revision) is a comple1e answer to the Appc:llan('s submissions. [ refer to Lord Mance'~ dicta in Strategic T,m.",ound referred \0 abo'"c In paragraph 178 and find that based on lhe binding Privy COUIN:il authomy of SrrQI<'gic T,m.a,,,,,,," it is clear that s.37(3)(c) reqUIteS that the manner in which any rednnplion rna)' ~ efIected must be authonSC'd by Or pur.;uant to the Anid..; of Association. and funher. the terms and mann ... of redemp1iom mWiI be SC1 out, or sufficientl} set out. in lite Articles of ASSQ<;J8tion. I find thm the decision of O"ulUghlin J. in Ihe Sooth Australian case of T,'7 Aus/fllli(J Pr)'. Ltd. ". No""""d), R""ourus LL applies to the circwnstanccs of llus casc. It represents a tIllIIOr vanat,on to Lord Mance' s requir<:rnent that the Anid,,!, of As5Qcialion mUSt S<:1 0111 the terms and manncr of redtmption, The dicta of O'wughhn J. III n\7 Ausr,ulia Ply. Ltd. ". ,v",,,,alldy R"s()111"('es I,L states that the Alticles of Association must, ....... SIIfficir~rly sri OUI Ihe lerms und mOlln." 0/ ",dempt;on in the AT/ic/eJ.·· When one teads O'wugh.lin J.·sjudgmenl m TNT Australia Prj", Ltd. ". "',,rmalldy Res"urre5 LL and Lord Mance's dlcla in Strategic Turnaraund. as read wjlh 11.37 oflhe CompanIes Law, Ihe followm& princIples are clear alld 1 so (ind: I. A company can only is ... c redeemable shares jf authorised 10 do SO by liS Articles - s.3 7{1) CompanIes Law: PugddQ!6IJ 2 ] 4 , 6 II. A coJllpany lIlIIy Ibm redeem shar~. bul only if audlO:msed to do SO by its Ankles - s.37(2) of the Companies Law; Ill. Both th= provisions (sr,wa) are subject to s.37(3)(c) of the Companies Law: and IV, Se<;lion 31(3)(c) provides that the manner of redemption must be sufficiently SCI out in the Articles. 7 IS4. J agree with the submission from leading COIlnsc1 for the SC(X)OO Respondents that 8 9 to the agreemeut referred 10 by the Appellants plainly falls foul of these rnlrmclted rights and for these reasons the agreement between PW and EGH d~ nOl bind Matador or the liquidator. I I
The Appellants maimain that their shares wen: emnled 10 be redeemed aJ; 8 m;ulll>f 12 Il 14 " 16 17 18 the se<:1'1:1 agreem~'fI1 between EOH and PW, IIQ\wilhs\.anding the gating and the suspension imrosed by Matador_ Upon the authority of S'r~l~gic T"."",ound and TNT Australia 1'1)'. LId. ", No,n,and>" R.-sourus LL, as read with •. 37. il is clear that prO\~sio"" of the Anicles cannot be trumped by the Agreement In Prin<.:iple bet"cen EOH and PW, which conflicts with the Anicles of Association. nor can s.37 be overridden by this purponed agreement or an estoppel. PRIVA T£ PL iC£.IIF..\7 M £.IIO(U,\ Ot.ll (PPM) 19
Miele S of the Anicles of Association sets OUI Ihe provisions for redeeming shares 20 21 22 in Matador. l1lroughout these provisions. the "Offering Memorandum" is referred 10 and therefore critical 10 Ihe underslanding of the opcr:Iliou of Ma tador'~ wreholdl'T redemplion righls. Pagdlo!60 1 J 4 , 6 7 8 9 10 II 12 !3 " 15 16 17 IS 19 20 " 22 13 24 25 26
19<) The Articles of Associallon defines ''Olfering Memonmdum" as follows: "The Pri,'(!/e Placemen' Memorandum Or ~ikeI' offcn'ng urx:u"",nl, PUI'1Ul.ItU /0 which and on Ih~ lermJ and conditions o/whkh /b" Redumtlble Shnr-es of each Closs ore offered for purchase a.! Ihe slime /My be amended or supple_mea by tile Directors/rom limJ! /0 lime:' leading counsel for the Liquidator submits thaI for the purpose of int<:rprtling the proviSIOns for redeeming shares found in ArtIcle 5, the "OlTering Memorandum" means the PPr-l lhat w .... ,,,,,e;,'ed and ,...,..d by the Appellant!. before the: subscription agreemmlS were e~eculed. Article 5ljl reads: "$J..bjec/ ,(> Ike pro,'isioru of and Ihe re51riclions cOn/ained in the La"" aha/del' of Redeemable SholW each Class shall be emilled 10 redeem all or uny of such R"dcemoble Shares on any Redemption Day jor (ke rcl~'Qm Cla.u by prior .. "rirlell flotice 10 the Company al proljdrd in thr Offering Mcrw:mmdum, and olloer in .• uch form giwn in slich 1II<1nn,'r as Ihe Direclors as shall. from time 10 lime determine blot no Red~emab/e Shares of a parlieulor C/a.<s sholl be rMumed w!rilsl the calrn/ation of the Net AnCl Value of Ihe Closs Is suspended:' Article ~(m) gives Matador the power to impose a gate on redemptions and reads: "if So sl'lIed /n Ihe Offem'g Memorand"",. if Ihe Company reeei...,,", any req"ellS for redemplion in NSpeC/ f!f any 011£ Redemption Day. eilhu singly ur "hen aggregal"d ".,10 Olher r~demptlon requests so rcce/wd. repreJellling more than UrN, oflhe nel asselS of Ihe Company. the Directors Il10)' refUse 10 hanOI" all such redemplion requals Ihat excud 10% uf lire nel rusers of lire Company on the rcl(!l'ant Redemption !)oy. /n detennining ... !rich redemption req"ests are 10 tw sotl5]ied OUi of I/'e COmJl(llIY'S (,,"oi/aNe cash r<"sen"('s. PBgd8 of(j() , ) 4 5 6 7 8 9 10 I I II IJ \4 191 192 rfll"eSIS for redempllo~s ,,'ill be rcdllc:ed proporlionme/y ond for any subsequent Redemption Day oms/aru/ing deforred red"mpljon rtiquesu will be honoured prior /0 nl'''' ,..,drmplion f"Q"e5IS, aI tire Nel Ass~1 Value per share on such subsequent Redemption Day," Whm One reads Article 5, the PPM has b«n Lllcorpornled by reference lhroughoU\, and one cann01 make sense of Artide 5 withou\ reference to the PPM. I agree will! the L,quidator's leading Counsel when he submits lMI ",-;thout the existence of the PPM lhe AppellanlS caMOl redeem their shares. and funher. any mlemption in the past made without n:fcrence to the PPM would be unauthonscd. The Appellants, Silu and Lansdowne:. Were' provided with the PPM as an attachment to the subscription agr=nenl and, in addition. as an 8uachmen\ \0 the email sent by Mr. Dcl1acker 10 Mr. MacKay and PW. The PPM was Sent 10 Mt MacKay and PW with the 1D\'e5lor pock for Matador and the Memorandum and Anicl~ of ASSOCIation of Matador. 15
The Appt:llarus e;tecmed th" subscripllon agreement mdicatlng thaI they had read \6 17 18 \9 the t= of the PPM. The PPM specifically hmJlS aUlhori~ed ~tatiOllS to those consislenl with Ihc lenns of Ihe PPM. The rr:present2tions made by EG!! 10 PW an: Inconsistent with the PPM and. ID my "irn·. e21lI101 be consid~ bmding on Matador. 20 19... Consequently. I Sctepl Ihe submissions of the Second Re-sponderus and the II l iquidator that the allliw"," 10 prelurunary question A IS 00. and. funh",.. the am",er 22 10 preliminary questioru; B. C, and 0 is also 00. The Agn:anenl. if any. referred to P<lge59 of (j(J I In WatersJ. and made bclwttl1 PW and EGH. does not bind Matador and does not 2 bind th~ Official Li<tuidator. 3 19~. The susperu;ion and gating provisiaflS of the Anides of A!;.soo,alion of Mn!ador 4 bind the regist~ :;hareholdm - Siln and lan!;downc - and ~uml ly the 5 Liquidator eSMOI be obliged to accept lite proofs of debt of either Appellant. 6 because they are prtmJ!ied upon the Articles of Association not bmdmg them. 7 19(;. The purported Agre<:menl in l'rirn:lpte ixt"een EGH and PW is Ulconsislmt with 8 the Articles of Association and it IS Ille Artldes which pro:vaiL The Agreement is , not sufficiemly set Out In the Artieies. il is not refcmd to at all In Lhe ArtIcles and.. 10 1\ l'i wholly inconsistent Wilh the Articles. Section )7 of the Comparues Law 11 applies. and any the purponcd agreemem bclwe"" EGH and PW is unlawful and of 12 no effect. 13
Accordingly I reject the Appellants' application thaI the Liquidator's rtjOl:tion of 14 15 their respective proofs of debt be SCI aside, and I refuse the olher relief sought in their Swrunons daled lhe 23'" February 2011, 16
Should counsel wi.!h to address me on the question of ClJSIS [ will hear submiSSIons 17 at a lalerdalc con"enienllo all the panies. 18 Oat ed th[Jt h ~l3" ,\ugu~t 20 12 19 21 22 lIonolirable Mr. Juulce C hu l e~ Qllin 23 Judge or the Grand COllrt