Maple Leaf Macro Volatility Master Fund v Jacques Rouvroy and Another
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE ANDREW SMITH,Mr Justice Andrew Smith |
| Judgment Date | 04 March 2009 |
| Neutral Citation | [2009] EWHC 701 (Comm),[2009] EWHC 257 (Comm) |
| Docket Number | Case No: 2007-1273,2007-1273 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 04 March 2009 |
[2009] EWHC 257 (Comm)
The Hon. Mr Justice Andrew Smith
Case No: 2007-1273
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Andrew Lenon QC and Fred Hobson (instructed by Herbert Smith LLP) for the Claimants
Peter Castle and Duncan Henderson (instructed by Anderson Castle & Co. Ltd.) for the Defendants
Hearing dates: 5, 6, 7, 10, 11, 12, 14, 18, 19 and 20 November 2008
Approved Judgment
Mr Justice Andrew Smith:
In July 2007 there were exchanges between the claimants and the defendants in which the claimants contend and the defendants deny a contract was concluded between them. The first claimant (“Maple Leaf”) also alleges that the defendants fraudulently misrepresented their intentions and claims damages in deceit. (The second claimant (“Astin”) abandoned its claim in deceit in the course of the trial.) The defendants bring a counterclaim against Astin for any sum for which they are liable under the contract if (contrary to their case) they are party to one. In this judgment I shall refer to the contract that the claimants allege as the “Funding Agreement”.
Maple Leaf is a Cayman incorporated hedge fund, managed in London by Maple Leaf Capital LLP, a Financial Services Authority (“FSA”) registered investment manager. The portfolio manager is Mr. George Castrounis. Astin is an investment manager that specialises in arranging capital market transactions. It is authorised by the FSA and also, under the “passport” system, by the French regulatory authority, the Authorité des Marché Financier. Its chief executive officer is Mr. Charles Bray and its managing director is Mr. David Ummels.
The defendants, Mr. Jacques Rouvroy and Mr. Krzysztof Trylinski, are the chief executive and deputy chief executive of Belvédère SA (“Belvédère”), a French company of which they are also the majority shareholders. Belvédère is the head of a group of companies whose main activity is the production and distribution of vodka and other drinks. It operates internationally and has a turnover in excess of €500 million per year. Mr. Rouvroy is largely concerned with the financial management of Belvédère and Mr. Trylinski, an engineer, concentrates upon operational matters. Both are French residents, although Mr. Trylinski originally came from Poland.
The claimants contend that by the Funding Agreement made in July 2007 Maple Leaf agreed to provide funding of some €30 million to the defendants to assist them to complete the funding of a private placement of the securities in Belvédère held by the group of CL Financial Limited (“CLF”), CLF being the head of a group, including Angostura Holdings Limited, that carries on an investment business based in Trinidad and Tobago. CLF was then the majority shareholder of Belvédère. Astin was to be paid a fee for arranging the funding. The claimants say that, subject to some consensual variations, the terms of the Funding Agreement are set out in a “termsheet” that was signed by the claimants and the defendants late in the evening on 25 July 2007. I shall have to examine in some detail the provisions of the termsheet (to which, for reasons that will become apparent, I shall refer as “Version 9”) and the circumstances in which it was signed. In broad terms the scheme was that the funding provided by Maple Leaf was to be used to finance the purchase from CLF of warrants in Belvédère; and the warrants were to be transferred to a company variously referred to as a special purpose vehicle (“SPV”) or a share acquisition vehicle (“SAV”) to be established by the defendants, and were to stand as security for repayment of the funding. In return, the defendants agreed (amongst other things) that they would place other securities in the SPV by way of further collateral for the funding; that on 1 August 2008 or, if earlier, one year from the funding date Maple Leaf would be repaid the amount of the funding, together with an uplift of 25%; that the SPV or the defendants would grant to Maple Leaf and Astin a call option over the warrants; and that “the Lenders” should have the right to “borrow” the securities held by the SPV during the term of the “transaction”. The scheme also contemplated that further funding was to be provided by a London based private equity investor called Lion Capital LLP (“Lion Capital”), who was to subscribe some €20 million for 120,000 shares, and Lion Capital too was to transfer the shares to the SPV and to have rights similar to those of Maple Leaf.
On 26 July 2007 Maple Leaf subscribed for warrants in Belvédère worth €29,999,946. The private placement was successful in that the defendants regained control of Belvédère, but they took no steps to establish a SPV. Maple Leaf has paid for the securities but has not been reimbursed for what it paid, or had the other benefits to which it says that it is entitled. It received and still holds the warrants but they have plummeted in value. The claimants say that therefore the defendants are in breach of the Funding Agreement and claim money due under it and damages. (They abandoned a claim for specific performance during the trial.)
Version 9 was headed with Astin's name and address, and was introduced by a “Summary” that read as follows:
“Summary: The founding shareholders of Belvédère S.A. (specifically Jacques Rouvray (“JR”) and Krzysztof Trylinski (“KT”) together referred to as the “Management”) and the SAV principals are presently in a share holding dispute with the majority shareholder, CL Financial. The founders have negotiated the option to purchase the entire share warrant and bondholding of CL Financial for 345.0m euros. The founding shareholders wish to borrow funds to allow for a vehicle to purchase those securities not taken up or placed as part of the share placement.
The Lenders will participate in the offering arranged by H & Associés and contribute the purchased securities to a special purpose vehicle “SAV” in exchange for the loan as agreed and detailed below. SAV shall be established by the Belvédère's management who personally undertake to use their best endeavours to complete any further documentation which is necessary to carry into effect the terms agreed below.”
After the Summary there was a heading in bold type that said, “Share Acquisition Vehicle with option to purchase Warrants. Outline Heads of Terms”. Under the heading Version 9 read as follows:
Underlying Security: Belvédère S.A.; ISIN FR0000060873; Bloomberg symbol: BVD FP.
Borrower: SAV (representing JR & KT, the Management).
JR & KT undertake to take all steps to establish SAV.
Until such time as the Borrower is established the Management agree that they shall act on behalf of the Borrower and that they undertake all of its obligations personally.
JR & KT shall be jointly and severally liable for any and all obligations of the Borrower in the event that the Borrower is unable to perform such obligation, including for the avoidance of doubt paying any sums of money due from the Borrower.
Seller(s): Angostura Holdings (“Angostura”), CL Financial and the related and affiliated companies of the CL Financial Group (“CL”).
Purchase Price: €50.070 million.
Purchased Securities &
Contributions: +330,000 warrants (ISIN: FR0010134247) expiring in November 2011 with an €85.0 exercise price @ €91.00 per warrant as purchased by Maple Leaf Macro Volatility Master Fund.
+120,000 ordinary shares of BVD as purchased @167.00 per share by Lion Capital's Fund(s).
+ 4.0% of the Purchase Price for Astin Capital Management Ltd's participation for the arrangement of the funds.
Loan Amount:€52.073 million – through the contribution of shares and warrants assets by the Lenders and acquired from the placing executed by Hottinguer including the contribution of Astin equal to 4.0% of the Purchase Price for arranging the transaction.
Lender(s):— Maple Leaf Macro Volatility Master Fund.
— Funds to be named managed by Lion Capital,
— Astin Capital Management Ltd.
Loan Maturity Date: 1 August 2008 or one year from the funding date whichever is earlier.
Loan Redemption Amount:€65.091 million.
Redemption Price: 125% of the Loan Amount.
Collateral: + 325,000 ordinary shares (unencumbered and non-pledged) in BVD provided by SAV principals JR & KT.
+ 380,000 warrants (unencumbered and non-pledged) in BVD (ISIN: FR0010304733) provided by SAV principals JR & KT.
+ all of the purchased Securities plus any rights, cash, distributions, and/or proceeds resulting from any corporate actions.
In the event of default the Lenders shall have equal security interests over the assets of the SAV with any proceeds realised.
Collateral Value:€58.44 million of ordinary shares (based on placing price valuation).
€19.0 million of warrants (bases on a value of €50.0 per warrant).
Plus, €50.07 million of the Purchased Securities.
LTV: ~40.87% initially.
Warrant Purchase Options: Maple Leaf Macro Volatility Master Fund and Astin Capital Management Ltd. shall have the option at any time over the term of the loan to purchase the 330.000 warrants (ISIN: FR0010134247 expiring in November 2011) held by the SAV vehicles [sic] for a consideration equal to €91.00 per warrant. The Lenders may cancel any portion of their outstanding loans at their Redemption Price in lieu of paying to the SAV the exercise price for the purchase of the warrants, i.e. €91.00 per warrant.
Default Event: The Lenders shall have recourse to all of the assets of SAV to be made whole with...
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