Old Park Capital Maestro Fund Ltd (a Cayman Islands company, (in Liquidation)) v Old Park Capital Ltd ((in Liquidation))
| Jurisdiction | England & Wales |
| Judge | Mr Justice Richards |
| Judgment Date | 27 July 2023 |
| Neutral Citation | [2023] EWHC 1886 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2021-001116 |
[2023] EWHC 1886 (Ch)
Mr Justice Richards
Case No: BL-2021-001116
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
CHANCERY DIVISION
Rolls Building
Fetter Lane
London, EC4A 1NL
Mr Jonathan Cohen KC and Mr Luka Krsljanin (instructed by Greenberg Traurig LLP) for the Claimant
Mr William Edwards and Ms Pia Dutton (instructed by Fieldfisher LLP) for the Second Defendant
The Third Defendant appeared in person
The First Defendant did not appear and was not represented
Hearing dates: 16 th May 2023 – 25 th May 2023; written submissions: 5 June 2023
APPROVED JUDGMENT
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This judgment is handed down remotely by circulation to the parties' representatives by email, The National Archives and publication on the Courts and Tribunals Judiciary website. The date and time for hand-down is deemed to be 2.00 PM on 27 July 2023.
The Claimant (the “Fund”) is a corporate investment fund incorporated in the Cayman Islands. The First Defendant (“OPC”) was the investment manager of the Fund. The Second Defendant (“HVK”) was the chief operating officer of OPC and a director of the Fund. The Third Defendant (“BP”) was a director of OPC.
| Defendant | Claims asserted |
| OPC | i) Breach of contractual and other duties owed to the Fund as the Fund's investment manager ii) Misapplication of assets of the Fund held on trust |
| HVK | i) Breach of contractual duties owed to the Fund under a Director Services Agreement ii) Breach of fiduciary duties owed as a director of the Fund under Cayman law iii) Common law deceit: misrepresenting to the Fund what its investment strategy would be. (The Fund abandoned a claim based on s2(1) of the Misrepresentation Act 1967 in closing). |
| BP | i) Inducing OPC's breaches of contractual and other duties owed to the Fund ii) Engaging in an unlawful means conspiracy (with OPC) to injure the Fund as a necessary means to BP's advantage iii) Dishonest assistance in OPC's breach of trust iv) Common law deceit — misrepresenting to the Fund what its investment strategy would be |
The present proceedings arise out of investments that the Fund made in 2015 in commercial paper (“KAM CP”) issued by a company called Kingsway Asset Management Ltd (“Kingsway” or “KAM”). Kingsway failed to repay in full three tranches of the KAM CP and the Fund accordingly suffered a significant loss on its investment. The Fund asserts that the investment in the KAM CP was not in accordance with its investment strategy and was made as part of an undisclosed and improper arrangement involving the Defendants and a consortium of businesses (the “Consortium”) connected with Mr Trevor Price (“TP”). The Fund's claims are summarised in the following table:
A list of issues was prepared for the Pre-Trial Review. However, none of the parties structured their submissions by reference to that list. I will not do so either, though I have referred to the list as a cross-check when making findings and considering the claims.
Witness evidence
I had evidence of fact from the following witnesses:
i) Mr Martin Trott, an insolvency practitioner and liquidator of the Fund.
ii) Mr Russell Burt and Mr Eric Bertrand who, together with HVK, comprised the board of the Fund.
iii) Mr James Sherwin and Ms Clare Ludgate, who provided advice to one of the Fund's main investors (“Montsol”), in connection with its investment.
iv) Mr Gabriel Collin, the head of Hedge Fund Research at Active Advisors, who provided investment advice to another of the Fund's investors (“Alpha”).
v) HVK
vi) TP
I had expert evidence from Mr Dominic Powell who had expertise on the management of credit portfolios.
BP did not give evidence. He made an application, which I considered at the beginning of the trial, for relief from sanctions so as to enable him to rely on a late witness statement of his own. I refused that applications for reasons that I have given separately.
Little needs to be said about the evidence of Mr Trott, Mr Burt, Mr Bertrand, Ms Ludgate and Mr Collin. They were honest and reliable witnesses and no-one suggested otherwise.
Mr Powell strayed somewhat outside his expertise in his expert report by offering an opinion on the proper construction of the Fund's offering memorandum. However, that aside, his expert report was dispassionate and scholarly and I have accepted his opinion evidence.
Mr Sherwin is funding this litigation. Moreover, in his oral evidence he showed flashes of the anger that he feels at what he perceives to be BP's dishonesty in the way he managed the Fund. Mr Sherwin, therefore, was not a disinterested witness. I am satisfied, however, that he gave his evidence honestly.
TP's witness statement was largely drafted by BP. Accordingly, TP's witness statement was not written in his own words. I have approached TP's evidence with a degree of caution as I was concerned that, in places, it involved an uncritical advancing of BP's case. That concern was, to an extent, allayed in TP's oral evidence which involved him giving largely straightforward answers to questions put to him. However, ultimately I have been unable to accept TP's evidence on certain issues, including the question of whether he arranged for Kingsway to pay expenses of the KP (Hull) project, described in more detail below, after the Fund launched.
During HVK's cross-examination, it became clear that various assertions in his witness statement were not true. The Fund helpfully set these matters out in a Table of Admissions (that also extended to admissions said to have been made by TP). I will not deal with each instance alleged. The headline point is that HVK was wrong to deny, in his witness statement, the existence of an arrangement or understanding, made prior to launch of the Fund, for the Fund to invest in KAM CP. He was also wrong to deny his knowledge of that arrangement which was laid bare in contemporaneous emails put to him in cross-examination. The Fund has invited me to conclude that HVK was an untruthful and unreliable witness. I have considered the matter carefully but, having regard to the totality of his evidence, I will not make that finding.
It was clearly not to HVK's credit that he made untrue statements in his witness statement. Moreover, he did initially defend those statements in cross-examination. However, once he was shown emails that showed the inaccuracy of his witness statement, he accepted the inaccuracies. That necessarily meant that there was some inconsistency in his evidence, but I consider that the Fund overstates matters when it says that most of the nine indicators of unsatisfactory witness evidence that Lewison J identified in Painter v Hutchison [2007] EWHC 758 (Ch) were present. HVK has given full disclosure of a large number of documents. While his answers to some questions in cross-examination were long, I did not consider him to be evasive or argumentative. When his answers were long, that was often because of the difficulty that he had in being invited to draw conclusions from a small cross-section of the emails that he had received at the time. If anything, he was on occasions too ready to accept propositions that were put to him.
Ultimately, I have concluded that the untrue statements in HVK's witness statement were a result of what Mann J described as “litigation wishful thinking” in Tamlura NV v CMS Cameron McKenna [2009] EWHC 538 (Ch). The Fund's case that OPC entered into a pre-existing arrangement to invest in KAM CP did not chime with HVK's recollection of the position at the time, or what he hoped the position was, and so he asserted that the Fund's position was wrong. That was unwise, but not dishonest. Some allowance is appropriate for the sheer quantity of emails that HVK received. Nearly 400,000 documents were extracted from HVK's data sources, reduced to 20,000 for the purposes of disclosure. The pre-existing arrangement for the Fund to invest in KAM CP featured in just a few of the emails that HVK received. He could well have overlooked those emails, or their significance, when preparing his witness statement.
PART A – OVERVIEW OF THE FUND AND ITS INVESTMENT IN KAM CP
BP, OPC and the Maestro Strategy
BP's experience and background; OPC's early days
I will not make findings as to the detail of BP's professional career not least because I have had no first-hand evidence from him. It suffices to note that, in a presentation in November 2013, BP was described as having by then over 15 years' experience in creating investment solutions using the sophisticated financial techniques. The presentation described highlights in BP's career including a role as Head of Structuring and Trading at a subsidiary of Credit Mutuel, the fourth largest bank in France, and a role as Senior Managing Director and Global Head of Structuring and Product Development at Bear Stearns.
At some point in BP's career, he developed a method of trading in exchange-traded index futures which came to be known as the “Maestro” strategy. In overview, Maestro was an arbitrage strategy which sought primarily to take advantage of the fact that equities that form a constituent of the EuroStoxx 50 index traded on underlying equity markets between 9 am and 5.30 pm CET on each business day, but equity futures referencing those constituents could be traded between 8 am and 10 pm CET. The strategy involved the taking of very short-term overnight positions in equity futures that would be closed out shortly after the cash equity...
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